Oil Markets in Flux, Banks Expect Doomsday Scenarios?

International bank Goldman Sachs seems to have joined the peak oil demand proponents, as the bank has brought forward its forecast for peak oil demand in the transportation sector by one year to 2026. GS analysts even reiterate that automotive demand could even peak before 2026, if accelerating adoption of electric vehicles (EVs) increases. The bank predicts an overall “anemic” pace of global oil demand after 2025. Some optimism is still there, as they see continuing growth in jet fuel and petrochemicals.

Goldman Sachs assessments, next to BP’s market shock statements, will have a detrimental effect on long-term prices, as they belong to a strong market movers groups, which also includes the IEA and EIA. The statements of GS however stand contrary to others, such as OPEC, the latter expects still strong growth. The hydrocarbon sector is expected to face severe risks from the energy transition onslaught, activist investors and government strategies.

However, oil and gas markets insiders still are not in majority believing the overall negative picture, as strong demand growth for oil is expected from emerging giant India, while other upcoming markets in Africa or Latin America are not yet even booming. To rely on the impact of EVs, first of all to take over the hundreds of millions of conventional cars, or trucks, taking into account the ongoing shift from small vehicles to SUVs or even bigger, demand is still strong for a very long time.

Without an adequate EV power infrastructure in place, high costs and needed government subsidies, expectations should be tempered much more than EV reports are showing. The expected worldwide government drive, as stated in EU Green Deal or Biden’s Energy Strategy, are until now mainly paper reports, where analysts are looking at as facts, but reality is much more stubborn than forecasting. At the same time, worldwide economic growth is even expected to accelerate faster, as stated by the IMF, than a couple of months ago. Reality shows that at present renewables are still only taking a thin slice of overall oil and gas demand, which will continue even longer. A rule of the thumb is a clear indicator, it takes 5 million EVs to replace 1 million bpd of oil demand.

Goldman’s sometimes market moving approach, not always resulting in a desired outcome for banks, investors or 3rd parties, is not being followed by others. A growing amount of banks is concerned about the current and future markets based on two other issues. The first is that positivism in the market is still not based on facts on the ground. Morgan Stanley already has stated that it has changed its oil price range for 2021 from $70 per barrel to between $65-70 per barrel.

The latter not due to lack or growth of demand, but based on higher US shale production in future and possible return of additional Iranian barrels. Morgan Stanley reiterates that at present, overall storage volumes are going down, while US mobility is still up. The bank did not look yet at outside issues, such as 3rd wave of COVID in EU, Latin America or India. Remarkably, GS is very bullish, forecasting Brent to hit $80 per barrel in summer.

The GS long-term demand predictions are also not supported by short-midterm assessments made by Rystad Energy. The latter foresees a strong year-on-year oil demand growth of 6% in 2021. Total global oil demand is expected to increase from 89.6 million bpd in 2020 to 95.4 million bpd in 2021. For 2022 Rystad expects a demand of 99.4 million bpd. Road fuel demand in 2021 is expected to increase by 9% to 45.1 million bpd in 2021, in comparison to 41.3 million bpd in 2020. 2022 could even add another 2.4 million bpd. Other fuels are also looking good. Jet fuel will increase by 21% to 3.9 million bpd in 2021, and 5.4 million bpd in 2022, almost at normal levels.

A more worrying picture, not for oil prices or demand, but supply is the ongoing financial onslaught on US oil and gas producers. According to the “Oil Patch Bankruptcy Monitor” by Haynes and Boone, since 2015, there have been 262 producer bankruptcies. In the same period, 298 oilfield services and midstream companies have filed for bankruptcy, bringing the combined North American industry total to 560.

For 2021 the picture already is very bleak, as during Q1 2021 eight producers filed, the highest level since 2106, when 17 were filed. The aggregate debt for producers that filed in Q1 2021 is just over $1.8 billion, which is the second lowest Q1 total, after $1.6 billion in Q1 2019. Main territory for filings in Q1 2021 is Texas, showing 50% of the total. Still, some light is there when you want to keep optimistic. Haynes and Boone report that there were no producers with billion-dollar bankruptcies this quarter, which has not happened since Q3 2018.

The US picture can be put on other regions too. Financials are constraining recovery of hydrocarbon sector companies for longer. If no change in cash flows, or investment inflows, supply is more an issue before 2025/26 than demand. Demand is there, now we need to have upstream companies produce the barrels.

On another front, the market is watching with anticipation the ongoing JCPOA Iran discussion. A possible re-joining of Washington of the international Iranian nuclear agreement is still in doubt, but the options that the Biden Administration will take this step is still there. The market expects that, if the JCPOA again is a success, if the USA joins, Iran will reenter in full the market, putting additional barrels on the market. Analysts are worried about the possible negative repercussions for global oil supply volumes and oil prices.

At the present market, the stability is still weak, as it is still a storm-wracked ship trying to find a safe harbor. The vessel is being repaired at sea, however, lingering storms on the horizon are still on the mind of OPEC+ leaders and traders. Part of the stability at present is the fact that Iranian, Venezuelan, and Libyan oil is still out of the market. Arab producers, US shale and Russia, are however fearful of a re-emergence of Iran’s export potential at a time of a very weak market equilibrium.

This concern could however also be a idee-fix, as Iranian oil is already in the market. The IEA reported that “China never completely stopped its purchases (of Iranian oil)”. The OECD energy watchdog also said that Iran’s estimated oil sales to China in the fourth quarter of 2020 were at 360,000 barrels a day, up from an average of 150,000 barrels per day shipped in the first nine months of last year. Just before the JCPOA discussions again started, Iran increased exports to China to around 600,000 bpd. Major Asian clients in China, India and elsewhere, are happy to take Iranian or (Iranian origin) volumes based on their very low price settings and attractiveness.

The question to be answered here however is will Iran be able to sell much more oil than at present if sanctions are retracted. Iran’s main position for several clients is linked to low prices or large discounts. When there is no need for a discount, expectations are that Iranian oil prices will be market conform again.

The latter could be a major constraint for exponential export growth in future, as clients will look more at cost/barrel than origin. The competition will be harsher, putting a damper on overall potential for sure as long as demand is constraint, and OPEC+ spare production capacity is relatively high. To expect higher supply volumes while markets are weak is too optimistic. Iran is not going to decide oil markets in 2021, at least via oil volumes. Fundamentals are not promising, the only price increase at present is geopolitical! Ukraine-Russia, Turkey-East Med, China-Taiwan or Biden’s Middle East policy is price drivers, the rest is just marginal.

For a look at all of today’s economic events, check out our economic calendar.

Oil Slips as Rising Infections Spark Demand Concerns

By Aaron Sheldrick

Brent crude was down 17 cents, or 0.3%, at $66.60 a barrel by 0643 GMT, after rising 6% last week. West Texas Intermediate (WTI) U.S. oil was down 10 cents, or 0.2%, at $63.03 a barrel, having gained 6.4% last week.

“The progress of vaccination drives in the developed markets can be seen in road traffic levels, but resurging case numbers have reversed the recovery in the emerging countries,” such as India and Brazil, ANZ Research said in a report on Monday.

India reported a record rise in coronavirus infections of 273,810 on Monday, increasing overall cases to just over 15 million, making the country the second-worst affected after the United States, which has reported more than 31 million infections. India’s deaths from COVID-19 rose by a record 1,619 to nearly 180,000.

Hong Kong will suspend flights from India, Pakistan and the Philippines from April 20 due to imported coronavirus infections, authorities said in a statement on Sunday.

In Japan, which has had far fewer COVID-19 cases than other top economies, companies there will be a fourth round of infections, with many bracing for a further blow to business, a Reuters monthly poll showed.

Japan’s oil imports in March fell 17% from a year earlier to 2.5 million barrels a day, official data showed on Monday.

In the United States energy companies added oil and natural gas rigs for a fifth consecutive week for the first time since February as higher oil prices this year encouraged drillers to return to the wellpad. [RIG/U]

(Reporting by Aaron Sheldrick; editing by Michael Perry and Jason Neely)

Right Here, Right Now: Norwegian Outages Start Building Up

If Q2 2021 European gas market can be accompanied by a soundtrack, it will definitely be ‘Right Here, Right Now’ by Fatboy Slim. The name of that song accurately describes the dynamism of things taking place since the very beginning of this year’s gas summer.

Following the reversal in injections into the gas storages, Europe is already experiencing lower production from the NCS. Norwegian maintenance, that has started during the second ten days of April, represents the first significant decline in gas supplies to NWE since January, when players lost access to LNG amid soaring Asian premium and vessel shortages.

Over a period of two and a half months, the regional market is expected to be short 4.9 bcm of supplies from Norway, most of which fell between April and May. Q2 daily gas exports from the country are expected to be constrained by 18% on average as compared to the levels seen in late March.

2021 Norwegian outages are developing according to their usual timing, in contrast to last year. In 2020, the works on the fields and processing plants were postponed until Q3 due to Covid restrictions, thereby extending a series of outages initiated by the planned shutdowns of Nord Stream and Yamal pipelines. It assisted in clearing a part of oversupply, laying a foundation for the subsequent growth in prices.

What influence Norwegian maintenance will have on the market environment this time? This is not a simple question, given the need for filling up storages on the one hand and favourable conditions for Europe-bound LNG deliveries on the other. As of now, the most that can be said is that the longer UGSs do not go into injection mode, the stronger will be the effect of Norway’s lower supplies throughout this quarter.

The opinions expressed in this blog are mine only and do not reflect the views of my employer.

For a look at all of today’s economic events, check out our economic calendar.

Natural Gas Price Fundamental Daily Forecast – Supported by Strong LNG Volumes, Cooler Temps

Natural gas futures moved higher on Friday, cementing a strong weekly gain. The market hits its highest level since March 12 on the back of increased weather-driven demand and strong liquefied natural gas (LNG) volumes. Perhaps putting a lid on the rally was a 2.0 cent drop in Natural Gas Intelligence’s (NGI) Spot Gas National Average.

On Friday, June natural gas settled at $2.754, up $0.024 or +0.88%.

Daily June Natural Gas

LNG Feed Gas Volumes Remain Supportive

NGI reported that LNG feed gas volumes hovered close to 2021 highs and above 11 Bcf on Friday, as export destinations in Asia and Europe continued to buy up U.S. supplies of the super-chilled fuel. Pipeline exports to Mexico also held strong, hanging near 7 Bcf.

Short-Term Weather Outlook

“Overnight, the European model continued to shift significantly cooler, adding 21.3 HDDs over the past 24 hours and extending cooler-than-normal weather through the end of April,” EBW Analytics Group said Friday.

The American model was essentially flat over the same period, EBW noted. It called for cooler temperatures over the coming week but a return to mild spring weather before the end of the month.

US Energy Information Administration Weekly Storage Report

The EIA reported on Thursday that domestic supplies of natural gas rose by 61 billion cubic feet (Bcf) for the week ended April 9. That compares with an average increase of 65 Bcf forecast by analysts polled by S&P Global Platts.

Total stocks now stand at 1.845 trillion cubic feet (Tcf), down 242 Bcf from a year ago but 11 Bcf above the five-year average, the government said.

Daily Forecast

Technically, the main trend changed to up. If the upside momentum continues then look for the move to possibly extend into a key 50% to 61.8% retracement zone.

The February 17 top is $3.082. The March 18 bottom is $2.521. Its retracement zone at $2.802 to $2.868 is the next likely upside target. Sellers could come in on a test of this area.

For a look at all of today’s economic events, check out our economic calendar.

Natural Gas Price Prediction – Prices Rise Closing the Week up 6.2%

Natural gas prices moved higher closing up 1%, and settling higher by 6.2% for the week. The weather is expected to be cooler than normal for most of the mid-west for the next 6-days days and then moderate. In late January through mid-February, significant colder-than-normal temperatures in the Lower 48 states resulted in increased heating demand for natural gas in the United States.

Technical Analysis

Natural gas prices moved higher on Friday. Resistance is seen near the 50-day moving average at 2.72. Support is seen near the 10-day moving average at 2.56. Medium-term momentum is positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line). Prices are overbought. The current reading on the fast stochastic is printing near 94, above the overbought trigger level of 80, foreshadowing a correction.

The weather was cold in January through February

In late January through mid-February, significant colder-than-normal temperatures in the Lower 48 states resulted in increased heating demand for natural gas in the United States, despite an otherwise warmer-than-normal winter. As a result, the winter had larger-than-average winter natural gas withdrawals. Before the cold snap, winter temperatures had been relatively mild, but a combination of increased heating demand, record liquefied natural gas and pipeline exports, and decreased natural gas production contributed to the withdrawal activity during February.

Natural Gas Weekly Price Forecast – Natural Gas Continues Choppy Behavior

Natural gas markets have rallied significantly during the course of the week to reach towards the $2.68 level, which is an area where we have seen resistance previously. Nonetheless, this is a very bullish candlestick so we could see a little bit more of a rally in the short term, but I do think that given enough time we will see plenty of sellers jumping into this market so that we can push this market to the downside.

NATGAS Video 19.04.21

Keep in mind that there is a massive oversupply of natural gas in general, and that will continue to work against the value of crude oil but given enough time I think that the market will set up an opportunity to start shorting. At this point, the $2.00 level underneath would be a longer-term target, an area where we have seen a massive move to the upside. All things being equal, this is a market that is that you sell for several months, as the temperatures start to climb throughout the year. All things being equal, this is a market that continues to see massive volatility, because the market itself is relatively thin.

At this point in time, I have no interest in buying this market until we get past October, so it is simply a matter of trying to find an opportunity to start shorting. Quite frankly, the higher we go, the more interested I am in doing this. The last couple of weeks have been a little cooler than usual in the United States, but it is certainly the wrong time of year to expect a huge surge in demand to be anything more than temporary.

For a look at all of today’s economic events, check out our economic calendar.

Natural Gas Price Forecast – Natural Gas Rallies Into the Weekend

Natural gas markets have rallied a bit during the Friday session as colder than usual temperatures have been seen in the United States. This is a short-term phenomenon though, so I think it is only a matter of time before we can start selling again. We have not formed the correct exhaustive candlestick to get involved though, but we are also seeing the bottom of the uptrend line that previously had been so important, so there could be a little bit of selling pressure in this area.

NATGAS Video 19.04.21

If we break down below the 50 day EMA, it could send this market much lower, perhaps reaching towards the 200 day EMA, maybe even the $2.50 level after that. If we did break above the top of the $2.70 level, then it is likely that the market could go looking towards the $2.85 level. Regardless, if we see signs of exhaustion, I am more than willing to jump on it as the temperatures in America will of course rise quite significantly. All things been equal, as long as that is the case then eventually the demand will drop and of course price will fall off the cliff.

Nonetheless, keep in mind that natural gas markets are very volatile under the best conditions, so you should be cautious about your position size. Ultimately, the 200 week EMA would probably be a significant target, but I still think we probably even break down below there and go looking towards the $2.00 level, as it has been so important multiple times in the past. All things been equal, I have no interest in buying this market as it is still oversupplied.

For a look at all of today’s economic events, check out our economic calendar.

Natural Gas Price Fundamental Daily Forecast – Trend Changed to Up with Buyers Eyeing Breakout Over $2.706

Natural gas futures are edging higher shortly after the opening on Friday as weather concerns dominated the trade for a second session. This follows yesterday’s abrupt reversal to the upside. Chilly April weather is driving the price action although Thursday’s government storage report did come in on the low end of expectations.

At 12:53 GMT, May natural gas is trading $2.689, up $0.031 or +1.17%.

US Energy Information Administration Weekly Storage Report

The EIA reported on Thursday that domestic supplies of natural gas rose by 61 billion cubic feet (Bcf) for the week ended April 9. That compares with an average increase of 65 Bcf forecast by analysts polled by S&P Global Platts.

Ahead of the report, Natural Gas Intelligence (NGI) reported that a Bloomberg survey found injection estimates ranged from 62 Bcf to 79 Bcf, with a median of 66 Bcf. The median of a Reuters poll landed at a build of 66 Bcf; injection estimates spanned 50 Bcf to 79 Bcf. NGI forecasted an injection of 67 Bcf for the period.

Total stocks now stand at 1.845 trillion cubic feet (Tcf), down 242 Bcf from a year ago but 11 Bcf above the five-year average, the government said.

Short-Term Weather Outlook

In a note to clients on Thursday, NatGasWeather characterized the temperature outlook as “solidly bullish” through April 24, with a ‘series of colder-than-normal weather systems” expected to “sweep across the country, coldest over the Midwest and Great Lakes.”

Analysts at EBW Analytics Group in a recent note pointed to colder April temperatures and “continued strength in core market fundamentals” as the key drivers behind recent gains in the May futures contract.

Daily May Natural Gas

Daily Forecast

Technically, the main trend is up according to the daily swing chart. The trend turned up when buyers took out the last main top at $2.688 earlier today. The trend will change down on a move through $2.453.

The minor trend is also up. A trade through $2.583 will change the minor trend to down. This will shift momentum to the downside.

The market is currently trading inside a major 50% to 61.8% retracement zone at $2.706 to $2.622. This zone is controlling the near-term direction of the market.

The short-term range is $3.060 to $2.453. If the upside momentum continues then look for a test of its retracement zone at $2.757 to $2.828. Sellers could come in on a test of this area.

For a look at all of today’s economic events, check out our economic calendar.

Natural Gas Price Prediction – Prices Rise Despite Robust Inventory Build

Natural gas prices whipsawed forming an outside day and closed up 1.76% on the trading session. This movement followed the Department of Energy’s inventory report, which shows a slightly larger than expected build in natural gas inventories according to survey provider Estimize. The weather is expected to be cooler than normal for most of the mid-west for the next 6-days days and then moderate.

Technical Analysis

Natural gas prices moved higher on Thursday, generating an outside day which is a higher high a lower low and a lower close. Resistance is seen near the 50-day moving average at 2.72. Support is seen near the 10-day moving average at 2.56. Medium-term momentum is positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line).

Inventories Rise More than Expected

Ntaural gas in storage was 1,845 Bcf as of Friday, April 9, 2021, according to the EIA. This represents a net increase of 61 Bcf from the previous week. Expections were for a 50 Bcf build in inventories according to survey provider Estimize. Stocks were 242 Bcf less than last year at this time and 11 Bcf above the five-year average of 1,834 Bcf. At 1,845 Bcf, total working gas is within the five-year historical range.

Natural Gas Price Forecast – Natural Gas Markets Continue Choppy Behavior

Natural gas markets have gone back and forth during the course of the trading session on Thursday as we continue to bounce around between the 200 day EMA on the bottom and the 50 day EMA on the top. That being said it should continue to attract both bullish and bearish traders, and of course the inventory number will have its say.

NATGAS Video 16.04.21

For what it is worth, we have a significant amount of cold weather in the United States for the next several days, but this is a short-term phenomenon and not something that will continue to be an issue. All things being equal, this is a market that if we can break down below the 200 day EMA, then I would be a seller and push this market all the way down to at least the $2.45 level, possibly even the $2.25 level. All things being equal, this is a market that I think will continue to suffer the seasonal effect of warmer temperatures and oversupply. Yes, there is the reopening trade that could keep this a little bit more levitated than some of the other years in the past, due to the fact that the economy has been locked down.

At this point, I do believe that the market continues to see the previous uptrend line as resistance as well, so quite frankly it is only a matter of time before the sellers come in and overwhelm again. As temperatures warm up in the spring, that will drive down demand, and therefore should drive this price much lower. To the upside, if we were to take out the $2.70 level, then I will simply sit on the sidelines and wait for an exhaustive candle to start shorting above.

For a look at all of today’s economic events, check out our economic calendar.

Natural Gas Price Fundamental Daily Forecast – Traders More Focused on Heating Demand than EIA Report

Natural gas futures are edging lower shortly before the government’s weekly storage report. Traders are not expecting to see a bullish report, but expectations of increased heating demand may be helping to underpin prices. Technically, traders are finding resistance at a long-term retracement area identified as $2.622 to $2.706.

At 13:49 GMT, May natural gas futures are trading $2.598, down $0.020 or -0.76%.

Short-Term Weather Outlook

According to NatGasWeather for April 15 -21, “Several colder than normal weather systems will track across the U.S. over the next week, with rain, snow, and chilly lows of 20s to 40s for strong national demand, coldest over the Rockies, Midwest, and interior Northeast. The southern U.S. will also see bouts of showers, although still mostly comfortable with highs of 60s to 80s. The West Coast will be the warmest and driest region as strong high pressure brings highs of 60s to 80s. Overall, demand increasing to moderate and high the next 7-days.”

US Energy Information Administration Weekly Storage Report

This week’s EIA storage report is expected to show a build in the mid-60s Bcf, according to consensus analysis.

Natural Gas Intelligence (NGI) is reporting that a Bloomberg survey found injection estimates ranged from 62 Bcf to 79 Bcf, with a median of 66 Bcf. The median of a Reuters poll landed at a build of 66 Bcf; injection estimates spanned 50 Bcf to 79 Bcf. NGI forecasted an injection of 67 Bcf for the period, which covers the week ended April 9.

An injection in line with consensus predictions would roughly match the 68 Bcf build EIA recorded in the year-ago period but would be bearish versus the five-year average injection of 26 Bcf.

Daily May Natural Gas

Daily Forecast

NatGasWeather said ahead of the EIA report, “National survey averages favor a build of 64-68 Bcf, but with the most notable at 68 Bcf.

It was warmer than normal over most of the U.S. besides the Southeast, especially so across the Midwest. Our algorithm suggests a build of 69 Bcf to the conservative side and 72-73 Bcf if production was a little stronger than expected. Either way, we expect a bearish outcome versus survey averages.”

For a look at all of today’s economic events, check out our economic calendar.

Natural Gas Price Prediction – Prices Whipsaw and Fall as Demand Drops

Natural Gas prices moved lower on Wednesday, whipsawing and closing near the session lows.  This comes ahead of Thursday’s inventory report from the Department of Energy. Expectations are for a 50 Bcf build-in stockpiles according to survey provider Estimize. The weather is expected to be colder than normal throughout most of the midwest for the next 6-10 days. There is snow expected in the mountains which should increase heating demand.

Technical Analysis

Natural Gas prices closed on the session lows after making a higher high which is a sign of rejection. Support is seen near the 10-day moving average at 2,56. Resistance is seen near the 50-day moving average at 2.73. Medium-term momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram is printing in positive territory with an upward sloping trajectory which points to higher prices.

Demand Falls

Demand for U.S. natural gas fell in all sectors except for deliveries to LNG facilities. According to the EIA total U.S. consumption of natural gas fell by 2.0% compared with the previous report week. Natural gas consumed for power generation declined by 4.0% week over week. Industrial sector consumption decreased slightly by 0.6% week over week. In the residential and commercial sectors, consumption declined by 1.2% as a result of mild temperatures.

Natural Gas Price Forecast – Natural Gas Stalls at 50 Day EMA

Natural gas markets have rallied a bit during the trading session on Wednesday to reach above the 50 day EMA but found plenty of sellers just north of it. That being said, the market looks as if it is ready to continue to chop sideways, perhaps before breaking down further. After all, natural gas will be in low demand season very shortly, as temperatures in the northern hemisphere rise. While that is not the only thing going on, it is by far the most important thing going on.

NATGAS Video 15.04.21

Natural gas markets of course have been very choppy as of late but if we were to turn around a break down below the 200 day EMA, that could convince me to start selling again, and perhaps aiming for lower level such as the $2.25 level, possibly even down to the $2.00 level. This time of year, I have no interest whatsoever in trying to buy natural gas, because quite frankly the demand will not come anywhere near the massive oversupply that we see on a regular basis.

With that being the case, I think what we are looking at is the possibility of a significant break down going forward, but this is a seasonal trade, and a lot of traders will have already known that. With that being the case, I think it is only a matter of time before one has to look at the possibility of fading rallies going forward, as it has certainly worked recently. Natural gas continues to be abundant, and therefore not necessarily something that demand is not taken care of.

For a look at all of today’s economic events, check out our economic calendar.

Natural Gas Price Fundamental Daily Forecast – Underpinned by Cooler Forecasts, Capped Ahead of EIA Report

Natural gas futures are slightly higher late in the session on Wednesday, but well off their intraday high. The market is holding support, but the early rally fell short of the last main top at $2.688. A trade through this level will change the main trend to up.

The market continues to be underpinned by weather forecasts calling for cooler temperatures and high liquefied natural gas (LNG) export volumes, but gains are likely being capped due to general uncertainty ahead of Thursday’s U.S. Energy Information Administration (EIA) storage report.

At 16:36 GMT, June natural gas futures are trading $2.630, up $0.011 or +0.42%.

Bespoke Weather Services Outlook

Colder trends over the previous 24-hours from both the American and European models added 10-12 gas-weighted degree days (GWDD) to the forecast over the next two weeks, Bespoke Weather Services said early Wednesday and Natural Gas Intelligence (NGI) reported.

The colder changes resulted from models showing “more chill in the Midwest and East over the next couple weeks,” the firm said. “…It remains difficult for weather to move the needle much at this time of year, but double-digit GWDD changes in a 24-hour period are noteworthy…We continue to look for a warming trend around the end of the month into early May, though nothing yet that leads us to believe we see a big early-season spike” in cooling degree days.

Maxar Weather Desk Outlook

Maxar’s Weather Desk made cooler changes to its updated forecast Wednesday for the six to 10 day period, starting Monday and continuing through April 23. The most notable shifts occurred in the Rockies and Midwest, according to the forecaster.

“High pressure, which has Canada origins, will carry a round of much below normal temperatures in these regions from early to mid-period,’ Maxar said. “Below normal temperatures are common in the Mid-Continent, with the exceptions being Texas late in the period. Texas moderates closer to normal on days nine and 10 along and in advance of low pressure.”

Further out in the 11-15 day time frame, from April 24-28, Maxar said its forecast “remains of lower than usual confidence for the lead time, with uncertainty pertaining to west Pacific Tropical Storm Surigae.”

Maxar’s latest forecast for the 11-15 period as of early Wednesday showed above normal temperatures over the Southwest and normal temperatures for the East Coast.

Daily Forecast

The price action suggests the futures market has already priced in the shift toward cooler temperatures into the latter half of the month. Therefore, we’re not looking for too much more upside pressure unless the cold extends into late April and early May.

For a look at all of today’s economic events, check out our economic calendar.

Natural Gas Price Fundamental Daily Forecast – Cooler 7 – 10 Day Forecast Underpinning Prices

After forming an elongated support base, natural gas futures surged on Tuesday amid forecasts calling for colder temperatures over the next seven-to-10 days.

Driving prices higher early in the session was overnight data from the American Global Forecast System (GFS) which showed added heating demand during the April 20 – 22 time frame, while the European model was milder trending for April 20-26 by showing less cold over the Great Lakes and Northeast, according to NatGasWeather.

On Tuesday, May natural gas futures settled at $2.619, up $0.058 or +2.26%.

More Details from NatGasWeather

“There’s still several cold shots to sweep across the country before then for strong national demand” this week through April 20 as weather systems are expected to bring low temperatures ranging from the 20s to lower 40s, the firm said and Natural Gas Intelligence (NGI) reported.

Projected temperatures from both the American and European models are likely “cold enough to be considered bullish” through April 22, but both models favor milder conditions April 24-27 that would result in light natural gas demand, according to NatGasWeather.

“Bull gained momentum in recent sessions by rallying prices off $2.50,” the firm said. “However, bulls likely don’t feel completely in controls with prices only 4-5 cents up from $2.50.” Colder temperatures over the next nine days and strong liquefied natural gas feed gas volumes are providing bullish support for prices, according to NatGasWeather.

“To the bearish side, production has increased several Bcf/d over the past few months, deficits are set to flip back to surpluses” following this week’s U.S. Energy Information Administration (EIA) storage report “and weather patterns April 24-27 aren’t hot or cold enough,” the firm said.

Daily May Natural Gas

Short-Term Outlook

The main trend is down according to the daily trend indicator. The main trend will change to up on a trade through $2.688. A move through $2.453 will signal a resumption of the downtrend.

The main range is $2.352 to $3.060. The market is currently testing its 50% to 61.8% retracement zone at $2.622 to $2.706. This zone is controlling the near-term direction of the market.

The short-term range is $3.060 to $2.453. If the main trend changes to up then look for a rally into its retracement zone at $2.757 to $2.828.

A failure at $2.622 could lead to another pullback into the support zone with the first support pivot coming in at $2.571. This is followed by the main bottom at $2.453.

For a look at all of today’s economic events, check out our economic calendar.

Natural Gas Price Prediction – Prices Rally on Cold Weather Forecast

Natural gas prices moved higher on Tuesday as colder than normal weather is expected to move into the south-central portions of the United States, increasing heating demand. The weather is also likely to be colder than normal in the midwest. U.S. Production continues to increase, but this has failed to weigh on prices.

Technical Analysis

Natural gas prices rallied on Tuesday, pushing through trend line resistance and poised to test the late March highs at 2.69. Additional resistance is seen near the 50-day moving average at 2.73. Support is seen near the 10-day moving average at 2.56. Medium-term momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line).

U.S. Production Continues to Rise

U.S. production continues to increase. According to data from the EIA, the average total supply of natural gas rose by 0.6% compared with the previous report week. Dry natural gas production grew by 0.5% compared with the previous report week to average 92.3 Bcf per day, which is almost the same level as for the same week last year. Average net imports from Canada increased by 4.1% from last week.

Natural Gas Price Forecast – Natural Gas Markets Pressuring 50 Day EMA

Natural gas markets initially pulled back a bit during the trading session on Tuesday but then turned around to show signs of strength as we are broken above the 200 day EMA. Cool temperatures in the United States may be partially to blame but at the end of the day we are still very much in a downtrend longer-term, and of course warmer temperatures will be coming.

NATGAS Video 14.04.21

With that being said, the market is likely one that you can fade in this general vicinity, and therefore I will be looking at the first signs of exhaustion to start shorting. After all, the demand for natural gas is going to start dropping off, and that should send this market back towards the lows again. Ultimately, I do think that this is a market that you cannot be buyers of, as the 50 day EMA is highly important. Longer-term, I do believe that we go looking towards the $2.25 level, possibly down to the $2.00 level. All things been equal, this is a market that I think continues to be an opportunity to short and a cyclical trade.

If we were to break above the 50 day EMA, then the $2.75 level will attract a lot of attention as we have broken down from that area. After that, the $3.00 level would be a major resistance barrier. After all, this is a market that sees plenty of oversupply longer term, so at this point in time it is simply a matter of waiting for some type of exhaustion in order to get involved.

For a look at all of today’s economic events, check out our economic calendar.

OctaFX Introduces New Currency Pairs And A New Commodity: ZAR Pairs And XNGUSD

The global Forex broker OctaFX has recently added the South African rand (ZAR) and U.S. Natural Gas (XNG) to its asset pool.

According to the Big Mac Index of the prestigious weekly newspaper The Economist, the South African rand is still one of the most underappreciated currencies worldwide, which makes it one of the rather fascinating and captivating currencies to pair with for trading.

Because of this unique appeal, the currency undergoes periods of high volatility, making pairs like USDZAR a go-to high risk/high-reward kind of play.

At OctaFX, the South African rand comes in the following currency pairs:

  • USDZAR (U.S. dollar/South African rand)
  • ZARJPY (South African rand/Japanese yen)
  • EURZAR (euro/South African rand)
  • GBPZAR (Great Britain pound/South African rand)

Lastly, OctaFX also introduced the currency pair with the commodity U.S. Natural Gas quoted in U.S. dollars (XNGUSD), expanding the trading opportunities even more.

All these new symbols listed above are available both on MetaTrader 4 and MetaTrader 5.

According to OctaFX’s latest update, the maximum leverage for USDZAR, EURZAR, and GBPZAR is 1:500, whereas, for ZARJPY and XNGUSD, it is 1:100.

Traders will want to keep a close look at the economic calendar, as far-reaching news can potentially impact these currency pairs. Anticipating when these catalysts could occur gives the Forex market participant a distinct idea of which order to open with these new and exciting pairs.

OctaFX is a global Forex broker that provides online trading services worldwide since 2011. It offers a state-of-the-art trading experience to over 6.6 million trading accounts worldwide. OctaFX has won more than 40 awards since its foundation, including the ‘Best ECN Broker 2020’ award from World Finance and more recently the 2021 ‘Best Forex Broker Asia’ award and the 2020 ‘Most Transparent Broker’ award from Global Banking & Finance Review and Forex Awards, respectively. The company is well-known for its social and charity activity and its promotions.

 

Natural Gas Price Prediction – Prices Rise but Fail To Recapture Resistance

Natural gas prices moved higher on Monday, rising 1.46% but was unable to recapture resistance levels. The weather is expected to be cooler than normal throughout the southcentral and mid-west regions for the next 6-10 and 8-14 days according to the National Oceanic Atmospheric Administration. The EIA expects that U.S. consumption of natural gas will be down 0.4% from 2020.

Technical Analysis

Natural gas prices moved higher on Monday but failed to recapture resistance near the 10-day moving average at 2.57. Target resistance is seen near the mid-March highs at 2.69 and then the 50-day moving average at 2.73. Support is seen near the April lows at 2.45. Short-term momentum has turned positive as the fast stochastic generated a crossover buy signal. Medium-term momentum has turned positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line).

The EIA Expects Consumption to Fall

EIA expects that U.S. consumption of natural gas will average 82.9 billion cubic feet per day in 2021, down 0.4% from 2020. The decline in U.S. natural gas consumption is a result of less natural gas consumed for electric power generation because of higher natural gas prices compared with last year. In 2021, we expect residential and commercial natural gas consumption will rise by a total of 1.1 Bcf/d from 2020 and industrial consumption will rise by 1.4 Bcf/d from 2020.

Natural Gas Price Forecast – Natural Gas Markets Hit 200 Day EMA

Natural gas markets have initially tried to rally during the trading session on Monday but have also pulled back a bit from the 200 day EMA. The $2.60 level of course is a large, round, psychologically significant number, and the scene of a gap previously that had been filled. Ultimately, this is a market that I think continues to see a lot of selling pressure above, and therefore I am more than willing to fade this market. After all, the demand for natural gas will more than likely drop over the next several months, as temperatures rise over the next several months. After all, we are heading into the springtime and then eventually summer. While natural gas is used to cool off as buildings and the like during summertime, the demand is much less than it is in the wintertime.

NATGAS Video 13.04.21

Furthermore, there are a lot of questions as to whether or not we will see a significant amount of pressure due to a strengthening US dollar in general. That being said, the market was to break down below the bottom of the candlestick for the trading session on Monday, then I think it opens up a move down to the $2.40 level, possibly down to the $2.25 level after that. One thing that we see time and time again is that this time of year is typically very negative for natural gas, so there is a bit of a longer-term cyclical trade involved in this market. All things been equal, I am a seller or not a buyer, in fact I have no interest in buying natural gas till at least October, perhaps even later than that depending on how weather plays out.

For a look at all of today’s economic events, check out our economic calendar.