Key Takeaways
Nymex natural gas futures settled modestly higher at $3.018/mmBtu, gaining 0.5% even as the U.S. Energy Information Administration reported a slightly larger-than-expected inventory build for the week.
"There appears to be significant support surrounding $3.00 per mmBtu for the prompt-month contract, which was tested and held in the minutes following the report,” Andy Huenefeld of Pinebrook Energy Advisors, said in a note.
The EIA reported a 101 billion cubic feet (Bcf) injection into storage, putting total working gas supplies at 2,409 Bcf. This level is 149 Bcf, or 6.6%, above the five-year average and 33 Bcf higher than the same period last year, according to the official data. The build was just above the 95 Bcf consensus forecast.
Traders are now watching weather forecasts into the Memorial Day weekend, as cooler temperatures could temper demand. The market is also monitoring a potentially bearish technical pattern after futures failed to hold gains above the $3.10 resistance level earlier in the week.
The market's ability to hold the $3.00/mmBtu level was a key focus following the data release. While the 101 Bcf build was larger than the 92 Bcf five-year average for the week, it was not enough to break the technical support that has underpinned the market. The prompt-month contract tested the level immediately after the 10:30 a.m. ET report but quickly rebounded.
Analysts noted that the full impact of a recent heat wave will not be reflected until next week's report. "The heat wave that began late in the week did not drive significant increases in power burn until after the cutoff for today’s report," Huenefeld noted.
While the main trend on the daily charts remains up, Wednesday's session printed a "closing price reversal top," a bearish pattern that was confirmed with a trade through $2.985, according to technical analyst James Hyerczyk. The next downside targets are the 50-day moving average at $2.923 and a retracement zone from $2.865 to $2.800.
Fundamentally, the supply picture remains comfortable. Lower-48 dry gas production is estimated at a near-record 109.3 billion cubic feet per day, up 1.4% from a year ago. This robust production has so far absorbed bullish catalysts, such as strong LNG export flows, and has kept a lid on any sustained rally. A broader selloff in the energy complex, triggered by reports of potential progress in Middle East peace negotiations that sent crude oil lower, also weighed on sentiment.
This article is for informational purposes only and does not constitute investment advice.
