On Wednesday, April Natural Gas closed at $2.868, up $0.037 or +1.31%.
One More Price Surge Possible Before the Shoulder Season
In addition to profit-taking and short-covering ahead of the government report, some concerns about the short-term weather outlook surfaced, leading to speculation that there may be one more price surge before the low-demand shoulder season begins in March. Nonetheless, I haven’t seen any unusual positioning, but I do know that anytime prices drop below $3.000 with winter still on the calendar, it will be perceived as a bargain by aggressive counter-trend buyers. To the trend trader, however, an upside price spike will likely turn into a selling opportunity just like last Monday’s gap opening.
EIA Storage Report Thursday Could Narrow the Deficit
Looking ahead to Thursday’s Energy Information Administration (EIA) weekly storage report, due to be released at 15:30 GMT, I’m seeing estimates ranging from 36 Bcf to 53 Bcf. A reading at the top of the range should help to reduce the current deficit over the 5-year average from 123 Bcf to 8 Bcf, according to The Wall Street Journal.
However, Ritterbusch and Associates’ analysts are still worried. They said in a note, “We feel that a deficit of around 30-40 Bcf could be maintained across next month in keeping the market sensitized to any unexpected loss of production or a swing in exports into new high territory.”
LNG Demand the Wild Card in an Oversold Market
NatGasWeather doesn’t see anything in the short-term outlook that could support the idea of a price spike caused by a sudden cold shot. They’re looking for low demand from Wednesday to Saturday. Unexpected production losses are rare, but a jump in LNG demand could be a surprise. Like I wrote earlier, prices are relatively cheap this late in the winter, so there is always the possibility of a short-covering rally because of an oversold market.
