By Barani Krishnan
Investing.com -- In a twist to the bearish story on natural gas, a surprise late chill for April is boosting heating demand in parts of America that have led to more use of the fuel and, consequently, less build of it in storage.
The most-active May gas contract on the New York Mercantile Exchange’s Henry Hub settled at $2.366 per mmBtu, or metric million British thermal units, up 9.1 cents, or 4%, on the day.
Since plumbing a session low of $1.946 on April 13, May gas has leapt more than 40 cents, or 22%, over three sessions.
That’s a definite upswing for a market that hadn’t seen such a winning streak since late February, when the 2022-23 winter was at a cold tail-end.
While the winter that ended a month ago was one of the warmest on record, significantly under-utilizing gas consumption for heating and boosting the fuel’s stockpiles in storage, some spring season chill in recent days may have strengthened the market’s outlook, said analysts.
“The question remains as to whether or not a seasonal bottom typically witnessed at the end of winter has been reached while extended bouts of cold weather across the U.S. are forecasted to assist in increasing demand for the final few weeks of April,” wrote analysts at Houston-based energy markets advisory Gelber & Associates.
If such bouts of cold weather linger, they could reduce injections of the fuel into storage over the next week.
Last week’s injection took the gas storage balance to 1.855 trillion cubic feet, the U.S. Energy Information Administration said. That was 33% above the year-ago storage level and nearly 19% higher than the five-year average for gas inventories.
“The 2022/23 winter has been categorized as incredibly mild, however, wintry blasts are now lifting heating demand and cash prices in the upper midwest and central parts of the United States,” Gelber’s analysts said. “Freezing temperatures and more than a foot of snow has put a pause on spring's low-demand season as heating demand spiked yesterday, nearly doubling in the Northeast and tripling in the Midwest.”
Gelber's analysts also noted that power demand for natural gas was unseasonably high for this time of year — at 29.2 billion cubic feet per day, or nearly 4.5 bcf daily above the five-year average of 24.7 bcf/d — due to low gas prices and cooler temperatures.
Technically, the three-day rally on the Henry Hub could feed further highs in gas prices, charts show.
“The next target would be the 50-Day Exponential Moving Average of $2.55, which if cleared with a daily close above the zone, can open way for further upside towards the next leg higher, enabled by the 100 Day Simple Moving Average of $3.43,” said Sunil Kumar Dixit, chief technical strategist at SKCharting.com.
He cautioned, however, that failure to make a sustained break above $2.55 could result in a renewed decline towards the support zones of $2.20 and $2.04.