Another Range-Bound Natural Gas Bounce

Natural gas prices bounced again today after a bearish reversal yesterday, pushing up against resistance this morning but failing to break above. 

This resistance test was expected in our Morning Text Message Alert this morning following an Afternoon Update yesterday that saw any dips as short-term buying opportunities. 

Our Morning Update similarly forecast another test of $2.97-$3 resistance upcoming but saw it as likely to hold. 

Those lingering cool risks in the medium-range came to fruition as well. Our Morning Update indicated that despite GWDD increases in overnight model guidance we were watching for 12z guidance to trend in a more bearish direction, in part due to a negative trend in the Southern Oscillation Index (SOI) we had been tracking. 

Sure enough, these trends verified, with both afternoon GFS ensemble and European guidance trended cooler across several key demand regions (image below courtesy of the Penn State E-Wall). 

The result was the front of the natural gas strip pulling back slightly into the settle, though the prompt month July contract did still log the largest gain on the day. 

We also saw a new narrow settle in the N/Q July/August spread. 

That spread has moved outside the historic range as well, which is something we constantly track to determine forward risk skews and develop a market narrative. 

Traders now await tomorrow's EIA print, which will contain some of the impacts of the LEX pipeline explosion last Thursday but not the holiday demand destruction of the previous print. Immediately following the print we release our EIA Rapid Release, where we break down the print and its exact impact as well as our updated end of storage forecast and natural gas sentiment.