Natural gas rallied early in the session on Wednesday, but succumbed to heavy hedging pressure to finish only slightly better for the session. Speculators initially drove the market higher ahead of Thursday’s U.S. Energy Information Administration’s weekly storage report.
June Natural Gas futures settled at $2.774, up $0.004 or +0.14%.
There were no significant revisions to the fundamental landscape so most of the price action was likely position-squaring. The move may have been designed to take out stops over $2.810 in order to allow hedgers to re-enter positions at more favorable price levels.
Today’s EIA report is likely to drive the price action immediately after its release, but the latest weather forecasts may take control later in the session since the report is considered “old news”.
Traders are looking for the report to show a draw of 23 Bcf for the week-ending April 13, which is 71 Bcf larger than a year ago and 62 Bcf larger than the 5-year average.
The EIA report is also expected to show 1,311 Bcf of working gas in storage during the same time period.
Fundamental traders are having a difficult time trying to forecast near-term demand because of the erratic weather pattern in the United States. The U.S. is currently showing heating demand in the Midwest and Northeast and cooling demand in parts of the Southeast and Southwest.
With cold weather lingering this week, we may see another small draw from natural gas storage for the week-ending April 20. This may be enough to keep a bid in the market, but not enough to drive it much beyond the $2.810 level which appears to be a key upside target.
Yesterday, the daily trend changed to up on the move through $2.810, but heavy selling came in at $2.818 to stop the rally and form a potentially bearish closing price reversal top. This may generate enough downside momentum to challenge the short-term retracement zone at $2.739 to $2.720.
During the early trade on Thursday, the market is straddling a 50% level at $2.766. Trader reaction to this level is likely to determine the direction of the market today.
This article was originally posted on FX Empire
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