Natural gas futures closed lower last week as investors resumed liquidation in anticipation of improving weather conditions into the end of the month and early April. The East Coast continued to get pelted with snow, but without an accompanying lingering cold weather system, traders were optimistic that conditions would improve over the near-term.
For the week, May Natural Gas settled at $2.633, down $0.083 or -3.06%.
Last week, the U.S. Energy Information Administration reported that weekly domestic supplies of natural gas dropped by 86 billion cubic feet for the week-ended March 16. This was in line with forecasts from S&P Global Platts which called for a decrease of 87 billion. The consensus estimate was for a draw of about 91 Bcf.
Additionally, the report showed that total stocks now stand at 1.446 trillion cubic feet, down 667 billion cubic feet from a year ago, and 329 billion below the five-year average, the government said.
Technically, May Natural Gas finished on the weak side of a key retracement zone at $2.675 to $2.728. This zone is new resistance.
The main trend is down according to the weekly chart. A trade through $2.600 will reaffirm the downtrend and signal that the selling is getting stronger. This move could create the downside momentum needed to challenge the next main bottom at $2.504.
According to NatGasWeather.com for the period March 25 to March 29, “Cool conditions will linger over the Northeast through the weekend where highs will only reach the 30s and 40s. The western U.S. will see weather systems with heavy rain and snow and slightly cool conditions. The central and southern U.S. will be mostly mild to warm with highs of 60s to 80s. A milder break is expected over the Southern and eastern half of the country Tuesday to Friday of next week with light demand as highs warm above normal and into the 60s to 80s, warmest over the South.”
Short-term oversold conditions may produce periodic counter-trend moves, however, the overall trend is expected to be down as we enter spring and the low demand period.