"Bottom line: The latest inventory data from the EIA were bearish, as the deficit versus the five-year average fell from 43 bcf to 28 bcf.
While the natural gas market may be close to balanced on a weather-adjusted basis, cooler temperatures are on the horizon, based on the latest forecasts. That will depress demand, and the deficit versus the five-year average is likely to be erased over the next few weeks.
Perhaps more importantly, the long-awaited decline in natural gas production remains elusive. Many had hoped that the strong inventory withdrawals we saw this past winter were evidence of production declines. Clearly, that wasn’t the case.
Now, gas is beholden to the weather and it’s not looking good for bulls. The technical backdrop has turned bearish with a series of lower highs and lower lows on the charts.
A move to the low-$3’s is possible as gas attempts to pick up market share versus rival coal in the power generation sector."