NYMEX Natural Gas April futures settle at $4.4500/MMBtu.

NYMEX Natural Gas April futures settle at $4.4500/MMBtu.

The NYMEX April natural gas futures contract experienced a significant decline on Friday, settling at $4.450/MMBtu after a day of consolidation [1]. This marked a 4.4-cent decrease from the previous session's closing price.

TFS Energy Futures broker Gene McGillian attributed the market's recent behavior to a combination of factors, including a lack of new buying and mixed fundamental expectations. "We continue to consolidate above $4.50[/MMBtu]," McGillian stated. "The market took on a little bit of a bounce [Thursday] ... but when we failed to attract new buying, it kind of came off. Now it's just treading water" [1].

One of the key fundamental factors influencing the market is the weather forecast. Although temperatures are expected to rise in the US Midwest and Northeast next week, this trend is expected to reverse, and temperatures are expected to turn colder by the end of March [1]. The US National Weather Service continues to forecast below-average temperatures across the eastern half of the country in its six- to 10-day and eight- to 14-day outlooks [1].

Another factor contributing to the market's recent behavior is the low level of storage inventories. As of last week, storage inventories stood at 1.196 Tcf [1]. This low level has prompted concerns about the market's ability to refill inventories at a sufficient pace ahead of next winter. However, limited price movements on the forward curve suggest that the market remains confident that storage will be able to rebuild to relatively comfortable levels by the end of October [1].

Despite the recent decline, the market has seen significant speculative activity in recent months. With the contract on its way to highs well above $6/MMBtu last month, many traders have taken on speculative positions. However, the $64,000 question remains: if the market breaks below last week's lows around $4.45[/MMBtu], will longs start to bail? [1].

References:
[1] Jessica Marron, "NYMEX April natural gas futures contract settles 4.4 cents lower after day of consolidation," Platts, March 7, 2014. [https://www.spglobal.com/commodityinsights/zh/market-insights/latest-news/natural-gas/030714-nymex-april-natural-gas-future-contract-settles-44-cents-lower-after-day-of-consolidation]
[2] Staff, "April natural gas futures retreat as spring-like weather saps demand," Natural Gas Intel, March 6, 2014. [https://www.naturalgasintel.com/news/april-natural-gas-futures-retreat-as-spring-like-weather-saps-demand/]