Natural Gas Price Prediction – Prices Slide Following Inventory Report

Natural gas prices continued to trading in a tight range, unable to break out or break down. This followed a slightly less than expected build in natural gas inventories reported on Thursday by the Energy Information Administration. The weather is expected to be colder than normal over the next 6-10 days in the East Coast and the mid-Atlantic. Energy production in the U.S fell 5% in 2020. Total production of energy in the United States fell to just below 96 quadrillion British thermal units.

Technical Analysis

Natural gas prices moved lower on Thursday after testing resistance levels and failing. Target resistance is seen near the February highs at 3.06. Short-term resistance is seen near an upward sloping trend line that comes in near 2.97. Support is seen near the 10-day moving average at 2.92. The 10-day moving average crossed above the 50-day moving average, which means that a medium-term uptrend is now in place. Short-term momentum has turned negative as the fast stochastic generated a crossover sell signal. Medium-term momentum is positive but decelerating as the MACD (moving average convergence divergence) histogram prints in positive territory with a sliding trajectory which points to consolidation.

Natural gas in storage was 1,958 Bcf as of Friday, April 30, 2021, according to the EIA. This represents a net increase of 60 Bcf from the previous week. Expectations were for a 65 Bcf build in stockpiles according to survey provider Estimize. Stocks were 345 Bcf less than last year at this time and 61 Bcf below the five-year average of 2,019 Bcf. At 1,958 Bcf, total working gas is within the five-year historical range.

Natural Gas Price Prediction – Prices Whipsaw Ahead of Inventory Report

Natural gas prices whipsawed on Wednesday, closing lower on the session, unable to push above resistance. This movement comes ahead of the Thursday inventory report from the Department of Energy. Expectations are for 65 Bcf build-in stockpiles, according to survey provider Estimize.

Technical Analysis

Natural gas prices moved higher lower on Wednesday after testing resistance levels and failing. Target resistance is seen near the February highs at 3.06. Short-term resistance is seen near an upward sloping trend line that comes in near 2.98. Support is seen near the 10-day moving average at 2.91. The 10-day moving average crossed above the 50-day moving average, which means that a medium-term uptrend is now in place. Short-term momentum has turned negative as the fast stochastic generated a crossover sell signal. Medium-term momentum is positive but decelerating as the MACD (moving average convergence divergence) histogram prints in positive territory with a sliding trajectory which points to consolidation.

The total supply of natural gas remains mostly flat. According to data from the EIA, the average total supply of natural gas rose slightly by 0.3% compared with the previous report week. Dry natural gas production grew by 0.9% compared with the previous report week. Average net imports from Canada decreased by 9.5% after a large increase last week. Net imports from Canada averaged 4.7 Bcf per day this week compared with 5.1 Bcf per day last week.

Natural Gas Price Forecast – Natural Gas Markets Sit Sideways

Natural gas markets have gone back and forth during the course of the trading session on Thursday as we continue to look at the $3.00 level as massive resistance. That is an area that has been difficult for some time, and it should continue to be. Quite frankly, I think this is a market that will see a lot of choppy volatility, but it looks as if we are running out of momentum. The market breaking above the $3.00 level still faces a lot of noise based upon historical behavior, and of course psychological resistance.

NATGAS Video 07.05.21

Given enough time, I fully anticipate that this market will start to fall, perhaps trying to drop down to the $2.75 level initially, followed by the gap underneath it has yet to be filled. After all, we are going to be getting warmer temperatures in the northern hemisphere soon, despite the fact that it has been cooler than usual. With that being said, there will be less demand for natural gas, in a market that is already oversupplied. There has been an uptick in foreign demand for liquefied natural gas, but at this point in time it will be enough to change the market dynamics.

Commodities in general have been getting a bid, so natural gas has become overvalued. I think eventually the fundamentals come back into play and we fall apart. With this, I like the idea of selling at the first sign of a breakdown, because we have such a significant and obvious round figure just above the use as a barrier to determine which direction, we are going in. All things been equal, the spring temperatures will start to overtake the market.

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

Natural Gas Price Fundamental Daily Forecast – ‘Bearish Surprise’ Fears Ahead of Weekly EIA Storage Report

Natural gas futures are trading nearly flat shortly before the New York opening and well ahead of the release of the weekly government storage report at 14:30 GMT. After reaching its highest level since February 22 on Tuesday, gains have been capped by expectations from a more substantial build in underground inventories.

At 11:31 GMT, June natural gas futures are trading $2.945, up $0.007 or +0.24%.

Energy Information Administration Weekly Storage Report

Natural Gas Intelligence (NGI) is reporting that traders are expecting today’s EIA report to show a storage injection for the week ended April 30 that could be more than four times greater than the prior week.

NGI also reported that a Bloomberg survey Wednesday showed a median estimate for a 66 Bcf injection, with predictions ranging from 49 Bcf to 76 Bcf. Estimates generated by a Reuters poll spanned increases of 49 Bcf to 76 Bcf, with a median of 65 Bcf. The Wall Street Journal’s weekly survey showed estimates ranging from increase of 52 Bcf to 70 Bcf, with an average of 62 Bcf.

NGI’s model predicted a 76 Bcf build.

Median estimates for the April 30 week, while much higher, still compare favorably to recent history. The EIA recorded a 103 Bcf build in the comparable week of 2020, while the five-year average injection is 81 Bcf, according to NGI.

If you recall, last week’s EIA report showed a 15 Bcf injection for the week ended April 23. That was well below normal for this time of year, leaving U.S. inventories at 1,898 Bcf – 302 Bcf lower than a year earlier and 40 Bcf below the five-year average.

After initially falling on the news last Thursday, prices rose on Monday in a delayed reaction to the news.

Short-Term Weather Outlook

According to NatGasWeather for the week-ending May 6 to May 12, “Weather systems and associated cool shots with showers and thunderstorms will continue across the Midwest and Northeast through next week with highs of 50s and 60s and lows of 30s and 40s. Cooling has also arrived into the South/Southeast with highs of 70s to low 80s for lighter demand, although warming back into the 80s and 90s from Texas to the Southeast late this weekend. The West will experience showers and cooling over the Northwest in the coming days with highs of 50s and 60s but very warm over the Southwest with highs of 80s to 90s. Overall, moderate the rest of the week.”

Daily June Natural Gas

Daily Forecast

Traders are taking no chances ahead of this week’s EIA report, essentially moving to the sidelines ahead of the numbers.

A neutral report would actually compare favorably to historic norms, but the move to the sidelines suggests traders are erring on the side of caution because of the possibility of a bearish surprise.

A bullish report could trigger a retest of this week’s high at $3.001, setting up the possibility of a breakout rally. A bearish report could drive prices back toward the upper level of a support zone at $2.868.

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

Natural Gas Price Forecast – Natural Gas Markets Pull Back From Big Figure

Natural gas markets have again struggled at the $3.00 level, an area that you would think would have to have a lot of options attached to it and therefore big positions. While the temperatures in the United States have been cooler than anticipated, the reality is that sooner or later the oversupply of natural gas comes back into the picture. There has been foreign demand for liquefied natural gas, but at the end of the day there is more than enough natural gas in the United States to cover all bases.

NATGAS Video 06.05.21

Because of this, I am looking for a selling opportunity and it certainly looks as if we are trying to build one in this area. We have had a couple of exhaustive candlesticks, so quite frankly it is not a real stretch to imagine that we may fall to reach down towards the previous Which is all the way down near the $2.70 level. In other words, I think we have quite a way to go to the downside given enough time and therefore I think we are looking at a situation that is much easier to sell than by, and quite frankly during this time of year I have no interest in trying to buy natural gas as temperatures will certainly begin to warm up again, and that allows for the idea of cheaper pricing. To the downside, the market very well could try to reach towards the $2.40 level by the end of summer, perhaps even as low as the $2.00 level. There seems to be a massive amount of resistance just above.

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

Natural Gas Price Fundamental Daily Forecast – Will Bullish Miss by EIA Be Enough for Sustainable Breakout?

Natural gas futures are trading slightly higher on Wednesday, but inside yesterday’s range. The early price action suggests investor indecision and impending volatility. The market inched above the psychological $3.000 level on Tuesday, but there was not enough buying to sustain the attempted breakout. This suggests that buyers feel that it’s too early in the season for a rally, or there are still not enough bullish catalysts supporting a price surge at this time.

Despite the slow trade, the market remains well supported. This means bullish traders may take another run at $3.00. They have two choices: buy strength and play for a breakout, or buy the dip and hope the fundamentals remain supportive.

At 14:03 GMT, June natural gas futures are trading $2.928, down $0.039 or -1.31%.

Short-Term Weather Forecast

According to NatGasWeather for May 5 to May 11, “Weather systems and associated cool shots with showers and thunderstorms will continue across the Midwest and Northeast into next week with highs of 50s and 60s, lows of 30s and 40s. Cooling will also push into Texas and the South/Southeast in the coming days with highs of 70s to low 80s for light demand, then warming back into the 80s and 90s late this weekend into next week. The West will see a mix of mild conditions over the Northwest with highs of 50s to 70s but very warm over the Southwest with highs of 80s to 90s. Overall, moderate the rest of the week.”

Early Look at Thursday’s Energy Information Administration Storage Report

Natural Gas Intelligence (NGI) reported that for Thursday’s EIA storage report, a Bloomberg survey as of early Wednesday showed a median estimate for a 66 Bcf injection for the week ended April 30. That was based on 10 estimates ranging from 49 Bcf to 76 Bcf. Bespoke Weather Services said its predicting a 71 Bcf build.

Daily Forecast

The market could remain rangebound on Wednesday as traders continue to assess the latest short-term weather patterns and position themselves ahead of Thursday’s EIA storage report. However, prices are likely to hover around $3.000 as traders await further bullish information that could launch the next breakout rally.

Bespoke said, “The market likely needs a new bullish catalyst to break through the $3.000 level, be it from a bullish miss in tomorrow’s report, or cash prices that continue to gain strength.”

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

Natural Gas Price Prediction – Prices Rise But Fail to Take Out Resistance

Natural gas moved higher on Tuesday but was unable to push through resistance ahead of Thursday’s inventory report from the Department of Energy. Expectations are for a 65 Bcf build in stockpiles according to survey provider Estimize. According to the National Oceanic Atmospheric Administration, warmer than normal weather is expected to cover most of the United States for the next 8-14 days. Residential and commercial demand fell due to mild weather.

Technical Analysis

Natural gas prices moved higher on Tuesday but was unable to push through resistance . Target resistance is seen near the February highs at 3.06. Short-term resistance is seen near an upward sloping trend line that comes in near 2.98. The 10-day moving average crossed above the 50-day moving average, which means that a medium-term uptrend is now in place. Short-term momentum has turned as the fast stochastic generated a crossover buy signal. Medium-term momentum is also positive as the MACD (moving average convergence divergence) histogram prints in positive territory with an upward sloping trajectory which points to higher prices.

The EIA Expectations Lower Consumptions

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 per day.

Natural Gas Price Forecast – Natural Gas Continues to See Resistance at Same Area

Natural gas markets initially tried to rally during the course of the trading session on Tuesday to reach towards the $3.00 level. That is an area where there is a lot of psychological resistance, and therefore it is not a huge surprise to see that we cannot get above there. The candlestick certainly looks as if it is going to show signs of exhaustion, just as the previous candlestick showed signs of strength. In other words, I think we are going to consolidate in this general vicinity in order to make a bigger decision.

NATGAS Video 05.05.21

While commodities have been in a bit of a massive rally overall, the reality is that natural gas markets will continue to suffer at the hands of an oversupply issue. Furthermore, there is a gap underneath that is going to be attractive for markets, as the 50 day EMA is at the very top of that gap. Gaps do tend to get filled in the futures market sooner or later, and it certainly looks as if we are running out of momentum. That is normally the first sign of a turnaround, so at this point time I think it is likely that we are going to see a little bit of a breakdown, and therefore I would be a seller if we break down below the lows of the last couple of days.

With this, it certainly looks as if the market is going to remain choppy, and I think it is only a matter of time before this choppiness leads to a break lower. However, if we break above the $3.00 level, then there is a whole range of seller pressure above.

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

Natural Gas Price Fundamental Weekly Forecast – Hovering Near Psychological $3.00 Level after Earlier Test

Natural gas futures are trading higher early Tuesday after briefly piercing the psychological $3.00 level and touching its highest level since February 23.

Overnight forecasts calling for higher demand due to colder temperatures this weekend and into next week, according to NatGasWeather, helped fuel the early surge. However, gains were likely limited as a loss of cooling degree days (CDD) offset the added heating degree days (HDD). This led to expectations of “comfortable” temperatures over the South and Southeast, the firm said.

At 14:00 GMT, June natural gas is trading $2.988, up $0.022 or +0.74%.

“While HDD are solidly above normal the next 10 days, this late in the heating season it won’t drive nearly as much demand compared to the core winter months,” NatGasWeather said. “…We continue to wait on more impressive, sustained heat to build over the U.S., and we expect it won’t occur until late May.”

Short-Term Weather Forecast

According to NatGasWeather for May 4 – May 10, “A weather system and associated cool front with showers and thunderstorms will advance out of the Plains, and Midwest and towards the East the next few days with highs of 50s and 60s, lows of 30s and 40s. It will be warm today over the East with highs of 70s to 90s until cooler air arrives Wednesday – Thursday. Cooling will also push into Texas and the South/Southeast in the coming days with highs of 70s to low 80s for light demand, then warming back into the 80s and 90s late this weekend into next week. The West will see a mix of mild conditions over the Northwest with highs of 50s and 60s but very warm to hot over the Southwest with highs of 80s to 90s. Overall, moderate the rest of the week.

Early Look at Weekly EIA Storage Report

Natural Gas Intelligence (NGI) is reporting that Energy Aspects issued a preliminary estimate for a 58 Bcf injection for the week ended April 30. The firm characterized the recent run of EIA reports as a case of “storage whiplash.”

Daily June Natural Gas

Daily Forecast

Tuesday’s early rally through last week’s high of $2.988 reaffirmed the uptrend. If the move continues to generate enough upside momentum then look for a near-term test of the February 17 top at $3.082. However, in over to get there this week, we’re probably going to need to see colder temperatures in the North for a prolonged period of time, or a really bad miss to the downside in this week’s EIA report.

Support comes in at $2.868 to $2.802. The main trend will change to down on a move through $2.735.

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

Oil and Gas Investor EnCap Raises $1.2 Billion Energy Transition Fund

By David French

The Houston-based firm is a prolific investor in hydrocarbons, and has raised more than $38 billion since its founding in 1988, with its latest flagship vehicle amassing $7 billion in 2017.

With investors more focused on environmental considerations, capital has been pouring into clean energy production.

“There’s definitely a movement among institutional investors into ESG of all kinds, including in the energy space,” Jason DeLorenzo, EnCap Investments’ managing partner, told Reuters.

EnCap had talked over a long period of time with its investor base about pursuing opportunities in energy transition, he said. Previous EnCap investors contributed around 75% of the new fund’s cash.

EnCap Energy Transition Fund I will invest in wind and solar power and energy storage, according to a statement. It will be run by Jim Hughes, a former chief executive of First Solar Inc, who was part of a quartet EnCap recruited in September 2019 to invest in renewable energy.

The fund has already invested in five companies, with Hughes saying in the same interview that around half the proceeds have been deployed.

Hughes declined to give a specific figure about return targets, but said it would be lower than EnCap’s upstream fund and above what infrastructure funds traditionally generate.

Private-equity firms normally pitch returns in the high-teens percentile, with the expectation for infrastructure funds in the high single digits.

EnCap is not abandoning oil and gas altogether though, with DeLorenzo seeing “robust opportunities” available for deploying the remaining $4 billion of its 11th flagship fund.

Portfolio companies within the energy transition fund could also help EnCap’s existing hydrocarbon-producing and pipeline investments with their own decarbonization efforts, Hughes said.

(Reporting by David French in New York, Editing by Sherry Jacob-Phillips)

Natural Gas Price Prediction – Prices Rally and Test Resitance

 

Natural gas moved higher on Monday following last week’s rally. According to the National Oceanic Atmospheric Administration, warmer than normal weather is expected to cover most of the United States for the next 8-14 days. Residential and commercial demand fell due to mild weather.

Technical Analysis

Natural gas prices moved higher Monday following last week’s rally. Target resistance is seen near the February highs at 3.06. Short-term resistance is seen near an upward sloping trend line that comes in near 2.98. The 10-day moving average crossed above the 50-day moving average, which means that a medium-term uptrend is now in place. Short-term momentum has turned as the fast stochastic generated a crossover buy signal. Medium-term momentum is also positive as the MACD (moving average convergence divergence) histogram prints in positive territory with an upward sloping trajectory which points to higher prices.

Demand is Lower

Residential and commercial sector demand falls because of mild temperatures. Total U.S. consumption of natural gas fell by 5.9% compared with the previous report week, according to data from the EIA. Natural gas consumed for power generation climbed by 1.5% week over week. Industrial sector consumption decreased by 3.0% week over week. In the residential and commercial sectors, consumption declined by 17.7% to 18 Bcf per day from 21.9 Bcf per day last week in response to seasonally rising temperatures across the Lower 48 states.

Natural Gas Price Forecast – Natural Gas Continues Just Below Major Resistance

Natural gas markets have gone back and forth during the course of the trading session on Monday, as we have seen the $3.00 level hold again, as it obviously catches a lot of interest. We have seen a lot of selling pressure just above previously, so the technical analysis suggests that we are still very much in a consolidation area. Furthermore, there is a massive gap underneath that has yet to be filled so I do think that it is only a matter of time before that happens. In other words, we probably have a pretty significant pullback coming down the road, but right now commodities are acting based upon the idea of reopening demand, something that will be falling anyway, due to the fact that temperatures will be warmer.

NATGAS Video 04.05.21

It has been a very cool spring, so that have thrown a bit of a monkey wrench into the cyclical trade. However, by the time we get a summer there will be demand for natural gas when it comes to cooling homes, but one has to wonder whether or not the demand will pick up in the commercial situation, as a lot of office buildings are sitting empty. Nonetheless, the cyclical trade typically works for a move to the downside, and that would just simply be a continuation of the range that we are in. If we break down below the $2.50 level, then we have the possibility of going all the way down to the $2.00 level underneath. I have no interest in buying this market at this time of the year, so on simply looking for an exhaustive candle that I can sell.

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

Oil Prices Slip as Pandemic Takes Toll on India’s Fuel Sales

By Florence Tan

Brent crude futures for July fell 48 cents, or 0.7%, to $66.28 a barrel by 0620 GMT while U.S. West Texas Intermediate for June was at $63.11 a barrel, down 47 cents, or 0.7%.

State-level restrictions aimed at stemming infections in India have led to a drop fuel sales in the world’s third largest consumer in April, preliminary data shows.

“Overall fuel demand is down by about 7% from pre-COVID level of April 2019,” A.K. Singh, head of marketing at refiner Bharat Petroleum Corp said, adding that India’s demand was close to pre-COVID levels in March.

India’s COVID-19 total cases are nudging close to 20 million and analysts are expecting a sharper slump in the country’s demand for transportation fuels in May due to more restrictions. [nL1N2MQ04B]

“Given that it still appears as though COVID-19 in India has not peaked, we expect to see further downside to fuel demand over May,” ING analysts said in a note.

On Sunday, a leading Indian industry body urged authorities to curtail economic activity, as the nation’s healthcare system was overwhelmed by the spiralling infections.

Globally, however, the rollout of vaccination campaigns is expected to lift oil demand, especially during peak travel season in the third quarter, prompting analysts to increase their forecasts for Brent prices for a fifth straight month, a Reuters poll showed.

The survey of 49 participants forecast that Brent would average $64.17 a barrel in 2021, up from last month’s consensus of $63.12 and the $62.30 average for the benchmark so far this year.

On the supply side, the Organization of the Petroleum Exporting Countries pumped 25.17 million bpd in April, up 100,000 barrels from March, as Iran and other producers increased output. OPEC’s production has risen every month since June 2020 with the exception of February.

Iran and the United States are in talks to revive a nuclear deal which could lead to a lifting of U.S. sanctions that would allow Iran to ramp up oil exports.

Washington on Sunday denied a report by Iran’s state television that the arch-foes had reached a prisoner swap deal in exchange for the release of $7 billion of Iranian oil earnings frozen by U.S. sanctions in other countries.

In the United States, energy firms added oil and natural gas rigs last week, leading to a ninth straight monthly rig count increase, as a recovery in prices lured some drillers back to the wellpad, according to Baker Hughes.

However, U.S. crude oil production dropped by over a million barrels per day in February, to the lowest levels since October, 2017, according to a monthly government report on Friday.

(Reporting by Florence Tan; Editing by Simon Cameron-Moore & Shri Navaratnam)

Natural Gas Price Fundamental Daily Forecast – Moving Higher as Traders Reassess Impact of Recent EIA Data

Natural gas futures are trading higher in the pre-market session as last week’s rally appears to be set to resume following a two-day setback. Lower production and expectations of a hot summer are driving the price action although some will argue that the latter reason to buy is a little ahead of schedule.

Although some traders are focusing on the expected summer heat, others are watching cooler-trending weather systems moving across the central and northern United States by the middle of the week.

At 11:38 GMT, June natural gas is trading $2.965, up $0.034 or +1.16%.

Short-Term Weather Outlook

NatGasWeather said a mostly comfortable pattern will rule the U.S. Sunday – Monday with highs of 60s to 80s besides hotter 90s in Texas. However, a fresh round of cooler than normal weather systems will push into the central and northern U.S. mid-week with highs of 50s & 60s, including cooler highs of 70s into Texas and the South. Overall, swings between low and moderate demand the next 7-days.

NatGasWeather went on to say that its weather models were showing cooler-trending weather systems moving across the central and northern United States by the middle of the week. The chilly weather was seen driving national heating degree days (HDD) to 20-30% greater than normal.

“But again, this late in the season, HDDs just won’t drive as much demand compared to core winter, and where we believe the natural gas markets would prefer hotter trends over colder trends to suggest summer heat will arrive early,” NatGasWeather said.

Energy Information Administration Weekly Storage Report

The U.S. Energy Information Administration (EIA) reported on Thursday that domestic supplies of natural gas rose by 15 billion cubic feet (Bcf) for the week ended April 23.

Total stocks now stand at 1.898 trillion cubic feet (Tcf), down 302 Bcf from a year ago and 40 Bcf below the five-year average, the government said.

Daily Forecast

The initial reaction to last week’s EIA report was bearish based on the fact that prices fell, but was it really bearish or did longs use the report as an excuse to book profits following a steep rally earlier in the week?

Natural Gas Intelligence (NGI) argues that what the market’s reaction to the EIA figure failed to illustrate was that the 15 Bcf injection resulted in a substantial expansion of year/year deficit. The build also flipped the five-year average to a 40 Bcf shortfall.

“It is first important to highlight the fact that the 15 Bcf build was the smallest build in the past 20 years for the third week of April,” said Mobius Risk Group. “Willingness to overlook this historically small build, and the 51 Bcf shortfall compared to the same week last year, was surprising.”

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

Speculators Keep Piling Into Agriculture Commodities

Saxo Bank publishes weekly Commitment of Traders reports (COT) covering leveraged fund positions in commodities, bonds and stock index futures. For IMM currency futures and the VIX, we use the broader measure called non-commercial.

The below summary highlights futures positions and changes made by hedge funds across commodities, forex, bonds and stock indices up until last Tuesday, April 27. A week where U.S. index futures resumed their ascent, the dollar continued lower while US Treasury yields ticked higher, while staying within their established ranges. Commodities surged higher led by very strong gains in grains and soft commodities.

Commodities

Money managers increased bullish commodities bets with the total net long across 24 major commodity futures rising by 4% to 2.5 million lots, representing a nominal value of $137 billion. This in response to a 3.6% rise in the Bloomberg Commodity index to a fresh ten year high. The bulk of the increase was concentrated in grains and soft commodities which rallied by 8.6% and 7.3% respectively. The biggest individual position increases was seen in sugar, coffee, wheat, gas, oil and copper.

Energy

The combined net long in crude oil reached a six-week high at 677k, with the increase being led by WTI while speculators kept an almost unchanged position in Brent, primarily due to an increased amount of naked short selling. The biggest change was seen in gas oil where the net long came close to a one-year high.

Latest: Crude oil futures trade lower for a second day with the uneven demand recovery creating a somewhat challenging outlook. In India, April gasoline demand fell to the lowest level since August and increased curbs on mobility may trigger further declines into May. This at a time when higher fuel consumption is being recorded in the U.S., China and the U.K. and OPEC+ during the next three months begins to add barrels back into the market. The outlook is further being clouded by uncertainty about U.S. production growth and Iran nuclear negotiations where a deal could trigger rising production. For now, Brent crude oil trades within an ascending channel, currently between $64 and $69.

Metals

A relatively quiet week in precious metals with gold’s failure to build on the recent break above $1765 attracting fresh short selling resulting in the bulk of the 6k reduction in the net long being driven by new short positions. Silver length increased by 8% and platinum by 25% on tailwinds from surging industrial metals. The 6.3% rally in HG copper helped attract new longs with the net rising by 23% to 55.5k lots, still well below the December peak at 91.5k lots and the 2017 record at 125k lots.

Latest: Gold (XAUUSD) and silver (XAGUSD) continue to frustrate bulls and bears alike given their inability to break current ranges. Both trading higher today after surviving another downside attempt on Friday when the dollar suddenly jumped. US Treasury yields continue to trade range bound with rising breakeven (inflation expectations) being offset by lower real yields. Speculators cut length in COMEX futures last week while ETF holdings remain stuck near a one-year low. Current range in gold being $1755 to $1800.

Agriculture

Most of the speculative buying last week was concentrated in the agriculture sector (ex. livestock) with most grains and softs contracts seeing strong gains. Most noticeable being the strong gains in corn, wheat, sugar and coffee with dry weather in South America and the U.S. plains hurting the production prospects. The combined long in corn, soybeans and wheat reached a fresh record and with the latter well below previous peak positions, further length could be added over the coming weeks. In softs, the coffee long almost doubled while the sugar long jumped by 15% to 258k lots, the third highest exposure on record.

Latest: The Bloomberg Grains Spot index, already at an 8 year high continues higher today led by corn (CORNJUL21) and (WHEATJUL21). In corn, the spread between the July (old crop) and December (new crop) contracts has widened to 115 cents per bushel, and it highlights the current stress in the spot market as a powerful La Nina disrupts harvests in Brazil with dry weather cutting the production outlook by 8% to 104m tons. Adding to the current unease has been record Chinese imports while US planting progress and weather developments will be watched for clues as to the direction of the new crop contracts, such as December. Weekly U.S. planting progress data due later at 20:00 GMT

Forex

Broad speculative dollar selling lifted the net short against ten IMM currency futures and the Dollar Index by 30% to $10.3 billion, a six week high. The dollar was sold against all the major currencies with the bulk of the change being led by short-covering in Japanese yen where 11k lots ($1,3 bn equivalent) was bought.

What is the Commitments of Traders report?

The COT reports are issued by the U.S. Commodity Futures Trading Commission (CFTC) and the ICE Exchange Europe for Brent crude oil and gas oil. They are released every Friday after the U.S. close with data from the week ending the previous Tuesday. They break down the open interest in futures markets into different groups of users depending on the asset class.

Commodities: Producer/Merchant/Processor/User, Swap dealers, Managed Money and other.

Financials: Dealer/Intermediary; Asset Manager/Institutional; Leveraged Funds and other.

Forex: A broad breakdown between commercial and non-commercial (speculators).

The reasons why we focus primarily on the behavior of the highlighted groups are:

  • They are likely to have tight stops and no underlying exposure that is being hedged.
  • This makes them most reactive to changes in fundamental or technical price developments.
  • It provides views about major trends but also helps to decipher when a reversal is looming.

Ole Hansen, Head of Commodity Strategy at Saxo Bank.

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This article is provided by Saxo Capital Markets (Australia) Pty. Ltd, part of Saxo Bank Group through RSS feeds on FX Empire

Natural Gas Price Fundamental Weekly Forecast – Setting Up for Bullish Run as Summer Demand Season Nears

Natural gas futures finished sharply higher last week with the rally driven by expectations of a decline in U.S. production due to regularly scheduled pipeline maintenance. Gains were capped, however, by favorable weather forecasts and a neutral U.S. government storage report.

Last week, June natural gas futures settled at $2.931, up $0.113 or +4.01%.

Bullish Traders Focused on Pipeline Maintenance

Pipeline maintenance led to a huge day/day decrease in production on Tuesday. According to Natural Gas Intelligence (NGI), a slew of pipeline maintenance events in the Northeast resulted in a 2.4 Bcf day/day drop in production. Meanwhile, Wood Mackenzie, a natural resources research and consulting firm, said unannounced operator field maintenance also likely contributed to the decline in output.

Energy Information Administration Weekly Storage Report

The U.S. Energy Information Administration (EIA) reported on Thursday that domestic supplies of natural gas rose by 15 billion cubic feet (Bcf) for the week ended April 23.

Total stocks now stand at 1.898 trillion cubic feet (Tcf), down 302 Bcf from a year ago and 40 Bcf below the five-year average, the government said.

Natural Gas Intelligence (NGI) reported ahead of the report, a Bloomberg survey of nine analysts produced injections estimates ranging from 6 Bcf to 19 Bcf, with a median build of 8 Bcf.

Short-Term Weather Outlook

NatGasWeather is predicting that one weather system with showers and thunderstorms will stall over Texas the next few days with highs of 70s, then exiting late this weekend. A second colder system will track through the Great Lakes and Northeast Friday-Saturday with slightly cool highs of 50s and 60s. The West will be very warm with highs of 70s to 90s, apart from the cooler and showery Northwest.

A mostly comfortable pattern will rule the U.S. Sunday – Monday with highs of 60s to 80s besides hotter 90s in Texas. However, a fresh round of cooler than normal weather systems will push into the central and northern U.S. mid-week with highs of 50s & 60s, including cooler highs of 70s into Texas and the South. Overall, swings between low and moderate demand the next 7-days.

Daily Forecast

Last week’s price action likely set the early tone for what should be a bullish summer if the heat arrives as expected. Prices could pull back over the short-run into support, but we may not see a change in trend on the move as buyers will likely welcome the corrective move so that they can enter at more favorable price levels.

I think buying the dip will be the strategy moving forward since it’s a little too early in the season to chase higher prices. With the main trend up, the safest play is buying weakness, buying strength carries a lot of risk.

Near-term bullish factors will be a more consistent decline in production, stronger power burns and an early return of hotter-than-usual temperatures.

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

KRK Terminal’s Receipts is a Microcosm of 2021 LNG Market

The Croatian FSRU became operational at the very beginning of this year, when suppliers actually lost interest in westward deliveries because LNG prices in the Asian region touched the skies amid unusually cold weather and shortage of vessels. There was only one cargo imported to the Krk terminal between January and February, a few weeks before the chaos in Asia began. Remarkably, the preliminary schedule for this year, published in Q3 2020, had foreseen the arrivals of five tankers in the first two months of 2021.

As the JKM-TTF spread had tightened, more and more cargoes made their way to Europe, as can be seen from the imports to Croatia starting from late Q1. In March and April, the country’s FSRU handled four carriers, half of which were loaded in the US that reacts to the market changes in the most timely manner among LNG producers. Another one was re-exported from the port of Zeebrugge, in sharp contrast to early 2021 when most cargoes redirected from Northwest Europe ended up in Asia.

Krk terminal is certainly not the only one in Europe which serves as an indicator of LNG market movements. However, if it may take quite a while to analyse larger installations, looking through Croatian imports can save you a lot of time. That is useful, isn’t it?

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

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Natural Gas Price Prediction – Prices Rise on Warm Weather Forecast

Natural gas moved higher on Friday and finished the week up 7.1%. According to the National Oceanic Atmospheric Administration, warmer than normal weather is expected to cover most of the United States for the next 8-14 days. This warmer than normal weather is likely to induce additional cooling demand. Total supply was mostly flat in the latest week while demand was on the rise.

Technical Analysis

Natural gas prices moved higher on Friday, finishing the week up 7%. Target resistance is seen near the February highs at 3.06. The 10-day moving average crossed above the 50-day moving average, which means that a medium-term uptrend is now in place. Short-term momentum has turned negative, but has been whipsawing as the fast stochastic generated a crossover sell signal. Medium-term momentum is also positive as the MACD (moving average convergence divergence) histogram prints in positive territory with an upward sloping trajectory which points to higher prices.

Supply Remains Flat

Total supply of natural gas remains mostly flat. According to data from the EIA, the average total supply of natural gas rose slightly by 0.3% compared with the previous report week. Dry natural gas production grew by 0.9% compared with the previous report week. Average net imports from Canada decreased by 9.5% after a large increase last week. Net imports from Canada averaged 4.7 Bcf/d this week compared with 5.1 Bcf/d last week and 3.8 Bcf per day for this week last year.

Natural Gas Weekly Price Forecast – Natural Gas Has Bullish Week

Natural gas markets have had a very bullish week, reaching towards the $3.00 level, an area that we have seen selling at previously. In fact, it is a roughly $0.20 resistance barrier that has been important recently, as we formed a massive shooting star here. Because of this, I am looking for some signs of exhaustion that I can start shorting, because not only is the cyclical trade going to be negative this time a year, but we also have a gap underneath that has yet to be filled. This shows up a little easier to see on the daily chart, but it is there on the weekly chart as well.

NATGAS Video 03.05.21

In fact, when I look at this chart, it looks to me like we are essentially consolidating, and we are close to the top of that consolidation range. The bottom of it is closer to the $2.50 level, which has been very important over the last several months. If we were to break down below there, then I think we opened up a move down to the $2.00 level after that. Ultimately, this is a market that has a seasonality to it, and this time a year typically sees a lot of selling.

I do realize that we have had a “cooler than usual spring”, and we also have the reopening trade coming down the road. Nonetheless, it is only a matter of time before the cyclical trade comes back into the picture as temperatures will eventually warm up and drive down demand for natural gas. If we break down below the $2.50 level, I will not only be short of this market, but I would be aggressively short.

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

Natural Gas Price Forecast – Natural Gas Continues to Flirt With Three Dollars

Natural gas markets have rallied a bit during the course of the trading session on Friday but turned back at the highs. At this point time, the natural gas markets are reaching towards the $3.00 level, which of course is a large, round, psychologically significant figure that a lot of people will be paying attention to. Furthermore, it is an area where we have seen a lot of resistance in the past anyway, and of course we are in the wrong time of year to keep up this type of bullish attitude.

NATGAS Video 03.05.21

I recognize that a lot of this has something to do with the “reopening trade”, but at the end of the day the longer-term situation and natural gas is a market that is overbought, and most certainly oversupplied. There is a gap underneath that has yet to be filled, and that almost certainly will be attempted sooner or later. It is because of this that I am looking for signs of exhaustion that I can start selling, as warmer temperatures are certainly going to drive down demand regardless of what happens on the industrial side. If we break down below that gap, then it is likely that the market is going to go looking towards the $2.50 level.

On the other hand, if we do break above the $3.00 level, I would not only be a bit surprised but would be looking to sell at the $3.20 level. Sooner or later, the cyclical trade comes back into the market, and quite frankly with over 15,000,000,000,000 ft.³ of proven reserves in the ground, natural gas is not a market that has a supply issue.

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