Natural gas futures have managed to consistently stay above last week's high this week, even in the face of significant selling pressure owing to the absence of weather-induced demand.
Thursday’s bullish EIA storage report missed that implied production was lighter than the expected levels.
This week will be of great interest as we observe whether the pipeline flow data will effectively reflect a decline in production.
Though production appears to be lower than expected, exports remain soft at only near 12.5 bcf/day, and weather patterns continue to exhibit bearish tendencies, as the heat is not widespread enough to generate significant cooling demand in the United States until the first week of June.
On Friday, natural gas futures look ready for a sharp reversal after testing the day’s low at $2.422.
Technically, movements in the hourly chart indicate the advent of a reversal if prices hold above $2.676 before this weekly closing, as the price trend since May 5, when natural gas tested a low at $2.032, provides evidence for a breakout shortly that could push prices above 2.777 once again.
The closing level of this week and the opening level of the following week will provide some solid cues about the next week’s directional movements when traders will experience the influence of the first week of June, which historically tends to repeat itself during the onset of summer demand.
I conclude that a downward move by natural gas futures up to $2.323 will provide a good opportunity to go long in today’s session.
Disclaimer: The author of this analysis does not have any position in natural gas futures. Readers should take a trading position at their own risk, as natural gas is one of the most liquid commodities in the world.