Natural Gas Futures Muted Ahead Of Thursday's Storage Report

Summary

• Temperature variability with bouts of cool and warm air to be the theme over the next 2 weeks.
• Injection over the next 4 weeks expected to come in above normal.
• Forecast models continue to support cooler late April (Warm West U.S. vs. Cool Central/East U.S).
• Natural gas front-month trades within a tight 2-cent between $2.72 and $2.70 on Tuesday.

Investment Thesis

Temperature variability and a lightened demand, amongst other variables, are expected to keep natural gas prices range-bound in the near term.

Market trades sideways ahead of Thursday's storage report; forecast models indicate cooler late April pattern

The Energy Information Administration (EIA) is expected to release its weekly natural gas storage report Thursday morning. The report should provide further insight as to the strength of the injection season.

The front-month May natural gas futures contract which trades on the New York Mercantile Exchange (NYMEX) closed flat on Tuesday to settle at $2.70. Trading range during Tuesday's session was again very tight at only 2 cents from $2.72 to $2.70. Figure 1 below is a chart showing the price trend of NYMEX's front-month May futures contract over the past 5 days.

Source: Investing.com

The United States Natural Gas ETF (UNG), which is the unleveraged 1x ETF that tracks the price of natural gas, finished Tuesday slightly lower 0.38% to $23.74. Figure 2 below is a chart showing the price trend of UNG over the past week.

Source: Investing.com

VelocityShares 3x Long Natural Gas ETN (UGAZ) and ProShares Ultra Bloomberg Natural Gas ETF (BOIL) were seen down 0.96% and 0.57% to $29.85 and $20.86, respectively. Meanwhile, VelocityShares 3x Inverse Natural Gas ETN (DGAZ) and ProShares UltraShort Bloomberg Natural Gas ETF (KOLD) were seen up 0.97% and 0.67% to $103.65 and $21.99, respectively. Figure 3 below is a chart showing the price trend of DGAZ over the past week.

The spot market saw rebounds from Monday across western Canada, and the central and southern U.S. Nova/Aeco was up $0.295 for the day on Tuesday. The Rockies (Opal) saw an increase from Monday up to $0.025 largely due to an increase in demand from cooler air coming in from the northwest on the backside of the "bomb cyclone" that's set to hammer

Analyst’s Disclosure:I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.