Natural Gas Fundamental Analysis, April 27, 2017
Technical and fundamental factors helped drive natural gas futures sharply higher on Wednesday. Prices surged from nearly a one-month low on scarce selling pressure and reports of cooler temperatures approaching several key demand areas.
June Natural Gas closed at $3.271, up $0.106 or +3.35%.
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Technically, investors came in strong on Wednesday after posting a potentially bullish closing price reversal bottom the session before. The market turned as prices approached a key retracement zone at $3.120 to $3.048. This suggests that investors, looking for value, came in to turn the market around. They may have also been buying in anticipation of tighter supplies later in the year.
Some traders said the buying was related to “a burst of late short-covering” tied to the final day of trading for the May futures contract.
Other traders said that cooler weather forecasts also contributed to the price spike.
Forecast
We should know within a day or two if the buying was real or if it was short-covering. If the buying was real then this move should overtake the short-term retracement zone at $3.274 to $3.309.
If it was fueled by short-covering then sellers will stop the rally on a test of this zone.
The catalyst behind the move will be the weather. According to natgasweather.com, “The west-central U.S. will remain cool and showery into next week with highs of 40s and 50s, 5 to 15 degrees below normal.”
“Overall, natural gas demand will be moderate into next week.”