US natural gas prices finished last week's trading higher for the first time after 5 weeks of declines. It should be noted that the entirety of last week's upward move was made on Friday after prices dropped below $2 per MMBTu and then started to recover. It is most likely driven by a profit taking after an important psychological level has been hit ($2.00). Moreover, some investors may have decided to close out short positions after a season for inventory refilling has begun.
When it comes to weather, the end-April period is expected to be colder than average. However, it should not have much of an impact on heating as average temperatures in the United States are already high enough for NATGAS demand to be low even at times of slightly lower-than-average temperatures.
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Temperatures in the end-April period are expected to be below average but it is past the heating season already. Source: NOAA
It should be noted, however, that volatility on NATGAS market has dropped considerably in recent weeks. On one hand, it may suggest that the market is about to experience some shift. On the other hand, there were already periods when gas demand was lower due to lower use in the industry - the last time in 2020 during a pandemic. Currently, US natural gas supply is still very high even after production dropped off a record level. Nevertheless, one cannot rule out a similar situation as in 2020 - a period of range trading that lasted over 6 months.
One should remember that NATGAS will experience rollover this week, which may lead to a temporary jump in volatility in the second half of the week. Simultaneously, sellers may once again take advantage of the situation to keep prices in range. Key level to watch after a rollover is $2.30 per MMBTu.
Source: xStation5
