Natural Gas Futures Pull Back Early as Traders Shrug Off Supportive ... - Natural Gas Intelligence

Natural Gas Futures Pull Back Early as Traders Shrug Off Supportive March Temps - Natural Gas Intelligence
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Natural Gas Futures Pull Back Early as Traders Shrug Off Supportive March Temps

Natural gas futures pulled back in early trading Tuesday as a more supportive fundamental outlook, including chillier March temperatures, proved insufficient to extend the recent rally.

The April Nymex contract was down 8.6 cents to $2.645/MMBtu at around 8:50 a.m. ET.

The April contract rallied 18.3 cents in Monday’s session as “fundamental support and bullish technicals” aligned to push prices higher, according to EBW Analytics Group analyst Eli Rubin.

“Although a retest of support is possible, upward momentum is expected to continue over the next seven to 10 days,” Rubin said. “$3 gas should not be ruled out.”

In terms of fundamental support for prices, the year-on-five-year-average storage surplus, after expanding winter to date, could begin to shrink in March, according to Rubin.

On the other hand, “a large portion of the rally is driven by short-term technical indicators,” Rubin said. “Widespread profit-taking by shorts may also provide fuel for further short-term gains.”

April prices on Monday “ever-so-slightly” advanced past a pair of retracement levels at $2.593-2.717 pegged by ICAP Technical Analysis.

To “keep the rally going” bulls would need to target $2.889, $3.034-3.069, $3.180, $3.308 and $3.370 as “the next stepping stones to the upside if they can,” ICAP analyst Brian LaRose told clients. “Note: At this time we are forced to treat any sideways to higher price action as corrective when it comes to the bigger picture.”

Meanwhile, there were only small adjustments from the weather data overnight, though the European model continued to advertise a “notably colder” outlook for the March 8-15 period compared to its American counterpart, according to NatGasWeather.

Forecasts continued to show this timeframe delivering colder-than-normal temperatures for most of the Lower 48 to drive strong demand for natural gas, according to the firm.

“Most important, the natural gas markets continue to be relieved weather patterns aren’t much warmer than normal for March” as they were for most of January and February, NatGasWeather said.

Recent longer-range forecasting further showed widespread below-normal temperatures extending into the March 15-25 time frame, the firm noted.

“However, there’s been other data suggesting cold might not hold as strongly March 15-25, suggesting changes are possible in time,” NatGasWeather said.

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