Natural Gas Gains in New York After Testing Technical SupportNaureen S. Malik
Natural gas futures climbed for the first time in three days in New York on signs of technical support for the fuel after a 10 percent drop since May 1.
Gas rose 1.5 percent before a weekly government supply report tomorrow that may show the biggest stockpile gain so far this year. The futures tumbled last week after the report showed an unexpectedly large increase. Gas is finding technical support below $4, said Stephen Schork, president of Schork Group Inc., a consulting group in Villanova, Pennsylvania.
“The report is going to confirm or negate last week’s number,” Schork said. “You’ve had a significant selloff and now you are in a technical range butting up against a protective buy-stop area.”
Natural gas for June delivery rose 5.8 cents to settle at $3.978 per million British thermal units on the New York Mercantile Exchange. Trading was 34 percent below the 100-day average at 2:45 p.m. Prices, which climbed to $4.444 on May 1, are up 19 percent this year.
A 62 percent price retracement between a recent high and low shows there is technical support for prices at $3.94, based on Fibonacci analysis, Schork said.
The discount of June to October futures, a measure of supply expectations for the summer, narrowed 0.2 cent to 10.3 cents.
Gas stockpiles probably increased by 86 billion cubic feet in the week ended May 3, based on the median of 20 analyst estimates compiled by Bloomberg. Projected gains ranged from 72 billion to 94 billion. The five-year average change for the week is an increase of 69 billion cubic feet, according to the Energy Information Administration, which is scheduled to release its weekly supply report tomorrow.
U.S. inventories in the seven days ended April 26 rose by 43 billion to 1.777 trillion cubic feet, the EIA said last week. That exceeded analysts’ forecast for a gain of 31 billion. Supplies were 6.2 percent below the five-year average, the widest deficit since February 2011.
“We are still at low levels in storage right now,” said Brad Florer, a trader at Kottke Associates LLC in Louisville, Kentucky.
Looking to tomorrow’s report, traders are trying to decide if the next move is going to be toward $3.75 or to $4.25, Florer said.
The mid-Atlantic states may see a brief surge of heat late this week and then again late next week, according to Commodity Weather Group LLC in Bethesda, Maryland. The forecaster sees above-normal temperatures from California to the Midwest from May 13 through May 22.
Prices have fallen close to the lower end of the Bollinger band, which may signal that gains are imminent. Some traders use the bands, developed by technical analyst John Bollinger, to judge support and resistance levels based on moving averages.
August $2.95 puts were the most active options in electronic trading, declining 0.1 cent to 0.5 cent per million Btu on volume of 2,600 at 2:47 p.m. Puts accounted for 53 percent of trading volume.
Implied volatility for August at-the-money options was 32.43 percent at 3:45 p.m., up from 32.01 percent yesterday.