Natural gas price edged higher in early Monday trade; up by 2.93% at $2.28 per metric million British thermal units (mmBtu) as at the time of writing. On the one hand, it rose above the bearish channel that has been in place since the beginning of March. Even so, it remains on the months-long downtrend. The supply/demand imbalance has continued to weigh on the asset.
The EIA weekly natural gas storage report released on Thursday highlighted a net increase of 25 billion cubic feet (Bcf) from the previous week. While the total working gas is still within the five-year historical range, the reported inventories were 460 Bcf higher than in 2022 during a similar period. Similarly, it is 295 Bcf higher than the 5-year average of 1,560 Bcf.
At the same time, mild weather has lowered the demand for heating in houses and businesses. As has been the case in past months, weather is a key driver of natural gas price. With the continuation of the warmer spring-like weather, the commodity will likely remain under pressure in coming weeks.
The technicals tell it all
Natural gas price recorded its first weekly gain in the just concluded week after five consecutive weeks in the red. Granted, it remains on the steep downtrend that has persisted since late last year. In fact, over a span of five months, the front-month natural gas futures contract on the New York Mercantile Exchange (NYMEX) has dropped by over 70%.
A look at its daily chart shows that natural gas price is hovering around the 25-day EMA at $2.29 at the onset of the new week. Notably, it has largely been trading below this technical indicator in recent months. Failure to break this resistance in the ensuing sessions could mean a return towards and below the crucial level of $2.00.
If that happens, $1.89 will be a support level worth watching. However, even with the probable rebounding, it may remain below the 50-day EMA at $2.61 for a while longer.