Warmer-than-expected temperatures over the week-end and respect for short-term technical support levels are helping to boost natural gas prices early Monday.
At 0932 GMT, July Natural Gas futures are trading $2.942, up $0.052 or +1.77%.
To recap last week’s government report, the EIA reported that domestic supplies of natural gas rose by 92 billion cubic feet for the week-ended June 1. The increase was in line with average expectations of analysts surveyed by S&P Global Platts.
Total stocks now stand at 1.817 trillion cubic feet, down 799 billion cubic feet from a year ago, and 512 billion below the five-year average.
The injection was 10.7% less than the 103 Bcf build reported in the corresponding week in 2017 as well as 11.5% under the five-year average injection of 104 Bcf, according to the EIA data.
As a result, stocks were 30.5%, below the year-ago level of 2.616 Tcf and 22%, under the five-year average of 2.329 Tcf.
Today’s early strength highlights the notion of a rangebound market with a bias to the upside. This assessment is being supported by trader respect for technical support levels and their response to the fundamentals.
Technically, the main range is $2.722 to $3.000. Its 50% to 61.8% retracement zone is $2.858 to $2.826.
The intermediate range is $2.804 to $3.000. Its retracement zone at $2.899 to $2.877 stopped the selling pressure last week.
The short-term range is $3.000 to $2.864. Its retracement zone at $2.932 to $2.948 is currently being tested. Trader reaction to this zone could determine whether prices move higher over the short-run, or retest support.
The market is rangebound because the injections and the weather reports have been solid enough to prevent speculative buyers from driving the market through resistance. At the same time, the deficit is still large enough to provide support.
The short-term outlook for the market will change on a sustained move over $3.000 and a sustained break under $2.804. Otherwise, look for buyers to continue to come in on the dips and sellers on the rallies.
Even if the market surges through $3.000, the rally is likely to stall because hedgers will be waiting for the opportunity to reposition their shorts.