Natural gas prices looked like they wanted to break higher, with the June contract testing the $2.87 resistance level before reversing into the settle off cooler afternoon weather models.
The role of weather was clear, with the June contract logging by far the largest decline on the day as the rest of the strip was solidly more supportive.
Our Note of the Day to clients yesterday highlighted why prices could rally into the $2.87 resistance level off widening spreads, but that acknowledged that weather and weakening power burns would make it harder for prices to break higher. Sure enough, it was the cooler trends that then pulled us lower today.
Then, our Morning Update and intraday Note both highlighted this trend into the day today, explaining that a strong strip kept $2.87 in play but we expected forecasts to cool this afternoon and pull prices back lower.
Disappoint weather did, with afternoon 12z GEFS guidance trending solidly colder in the long-range (image courtesy of the Penn State E-Wall).
This led the June/July M/N contract spread to widen even further, moving back closer to the range it was in late in April.
The June/October M/V spread took an equally large hit.
As we had been outlining to clients the last couple of days, our new power burn model had shown rather a significant loosening in power burns, a bearish fundamental factor for a market similarly dealing with GWDD losses. Then today in our Pre-Close Update we broke down recent changes in weather model guidance and explained whether we expected them to continue over the weekend, putting in context today's price action along the natural gas strip and recent trends in our balance modeling.
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