BWS Blog

Natural Gas Prices Remain Range-Bound; Is A Move Imminent?

Friday, May 14, 2021 at 10:11PM

Natural gas prices continued to trade in a rather tight range for another week, with the prompt month June contract still stuck in the $2.90 to $3.00 range, where it has spend nearly the last three weeks.

natural gas commodity weather

As seen on the chart, it is not common for prompt month prices to stay in such a tight range for this long, signifying that we may be "due" for a stronger move very soon. We did, in fact, test both sides of the range this week, briefly falling under $2.90 early in the week, and moving above $3.00 for a time this morning, but neither move was able to hold. One thing we do take note of this week is a tendency for Henry Hub cash prices to trend weaker, both in absolute terms, as well as relative to prompt month.

natural gas commodity weather

Cash and prompt month often move together, but we did not see a drop in prompt month to go along with the decline in cash. This suggests that, as we head into next week, either cash prices rally back, or we are at risk to see a decline in prompt month pricing.

In terms of demand, there is not much to be had yet, as the weather pattern remains quite tame, with no noteworthy heat yet in key areas of the East and South, most crucial for natural gas consumption.

natural gas commodity weather

In fact, this pattern is set to deliver below normal demand over the next week or so, at an already low demand time of year, as measured by Gas-Weighted Degree Days (GWDDs).

natural gas commodity weather

Aside from temperatures, wind must be considered as well. This week featured lower wind output (meaning more natural gas usage), but we expect to see higher wind levels next week, relative to this week.

natural gas commodity weather

Higher wind output would act to reduce natural gas usage, all else being equal.

So, the question is, does the upcoming lower demand period lead to further weakening in the cash market, thereby posing downside risks to the prompt month June contract? Or will the market view the supply / demand balance as still strong enough, as it has been the last few weeks, to keep support underneath prices, and perhaps finally send the market higher?

We will be monitoring all of this, and much more, very closely, offering detailed analysis in our daily reports. If you are an active trader in the natural gas market, and are looking to stay ahead of changing market conditions, give our products a test drive. Sign up for a 10-day FREE trial here to take a look at all of the products we have to offer that can give you the edge you are searching for.