Rangebound trading will continue to be the theme in the near term with heat, strong inventory builds, and the balance between demand and supply in focus.
Natural gas prices traded higher on Thursday despite strong inventory build
The front-month June natural gas futures contract finished Thursday up 1.40%, or 3.8 cents ($0.038), to $2.639. The July contract increased 4 cents ($0.040) to $2.674, while the August contract gained 3.8 cents ($0.038) to $2.689. Figure 1 below is a chart depicting the price trend of the front-month June contract over the past 24 hours.
The United States Natural Gas ETF (UNG), which is the unleveraged 1x ETF that tracks the price of natural gas, was seen higher 1.33% to $22.86.
UNG's leveraged exposure ETFs, the VelocityShares 3x Long Natural Gas ETN (UGAZ) and the ProShares Ultra Bloomberg Natural Gas ETF (BOIL), traded higher 3.78% and 2.49% at $26.11 and $18.93, respectively. Meanwhile, UNG's high-beta leveraged inverse ETFs, the VelocityShares 3x Inverse Natural Gas ETN (DGAZ) and the ProShares UltraShort Bloomberg Natural Gas ETF (KOLD), traded lower 4.05% and 2.58% at $113.04 and $23.77, respectively.
Forecast models hinting at cooler changes in the 11-16 day with Southeast heat fading
The weather pattern over the next 10 days will feature a cool western vs. warm to hot central/eastern U.S., with the bulk of the heat confined over the southeastern U.S. A -NAO high latitude block will have influence on this amplified pattern, keeping the northeast U.S. cooler. Storms along the periphery of this southeastern U.S. ridge will help to keep cooling demand levels in check across sections of the central U.S. (Plains/Midwest). The main development over the past 24 hours has been the cooler trend in the 11-16 day period. Forecast models are showing the heat ridge over the southeastern U.S. weakening/fading. Figure 2 below is a map from the 12z ECMWF ensemble depicting the upper level pattern in the 10-15 day time frame.
Final Trading Thoughts
Expect for prices to remain rangebound, with the balance of demand and inventory build in the coming weeks being the primary players in focus. My price range will be $2.50-2.80 for the week for the front-month June futures contract, with UNG trading between $20.00 and $25.00.
Stay tuned for more updates!
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