May 13 natural gas opened today at $4.442 and is showing signs of trailing after yesterday's upside swing of nearly 25 cents. The move is in response to news from EIA that current natural gas in storage is increasing -- showing this season's first net injection -- but still 31.8 percent below year-ago.
Based on the technicals in the contract, we expect May '13 natural gas to move sideways for just a little longer today before correcting to the downside. A move above $4.42 would signal more upside action, but at these elevated levels, upside action appears to already have been exhausted.
Bears' next target -- according to the chart -- is at $4.36, but this upside action may run out of steam as quickly as it climbed and deflate back to a more typical range. In that event, support targets lie at $4.18 and $4.15. These elevated prices are bound to set off a round of profit taking which signals downside movement ahead.
According to estimates from Bentek, average natural gas consumption for the nation rose this report week by 1.6 percent over last week’s daily average. Natural gas consumption increased in the residential/commercial and power sectors by 0.8 and 4.5 percent, respectively, for the report week. Natural gas consumption in the industrial sector decreased modestly by 0.1 percent.
Temperatures during the storage report week were 3.0 degrees warmer than the 30-year normal temperature and 1.1 degrees warmer than the same period last year. Temperatures in the Lower 48 states averaged 54.0 degrees, compared to 52.9 degrees last year and the 30-year normal of 51.0 degrees.
Working natural gas in storage registered its first net injection for the season, increasing to 1,704 Bcf as of Friday, April 12, according to EIA's WNGSR. This represents an implied net injection of 31 Bcf from the previous week. Both the 5-year average and year-ago stock changes for the week were implied net injections of 39 Bcf and 21 Bcf, respectively. Inventories are currently 794 Bcf -- 31.8 percent -- less than last year at this time and 74 Bcf -- 4.2 percent -- below the 5-year average of 1,778 Bcf.