Higher last couple of weeks, and the normal mix of weather, storage numbers, and short covering can all prices in the US natural gas market today are short covering. The market has been heavily sold over the serve up a nice day for the bears to return to the fold for a day or two. These sorts of days look great in the chart, but do not represent a change in the underlying fundamentals of
For today’s rise to be sustained demand would need to improve notably across all three of industrial, LNG and power‑burn consumption. However for now industrial consumption is soft, LNG feedgas flows stable but not trending up strongly, and power‑burn is not yet in peak season. As a result any rise on the day is more likely to be driven by short‑term sentiment than any macro change in trend.
Looking at the supply side, production has fallen temporarily due to freeze-offs and maintenance; however, levels are near records and increasing. Storage levels are more than adequate and there is no near-term supply shortfall. Thus, rallies, rallies are likely to be short-lived unless a strong catalyst is introduced to the market.
This short term up move on gas is nothing more than a technical correction in the market. The heavily shorted commodity is experiencing huge amounts of short covering as investors are taking huge profits off the table. The commodity will pop up on a short term basis due to the huge amount of short covering taking place but it will fall back rapidly unless there is a huge change in weather or other fundamentals that would cause a huge up move in gas. In the meantime, it is just a bounce in the market.
uptick makes sense for now but it’s just a bounce off of low for now.