June 5 2024 Market Update

Inside day today

Today’s price action was inside yesterday’s, meaning today’s high is less than yesterday’s high and today’s low was more than yesterday’s low.  This makes sense in that we had a big down move yesterday and the storage report is tomorrow; Traders don’t want to take a new position in front of the release tomorrow in case they are wrong.

I thought I would put up a chart of NG!, the prompt months strung together.  Basically, it is the chart of the last 20 trading days of each different contract taped together.

Notice how we spent the beginning of the year trading below the $2.00 US/mm level, but in May we broke above that level and are now consolidating  around the $2.70 level ($2.50 to 2.85 range).  I don’t know which way the market will break from here, but I will be interested when this market decides to go above the $2.85 level or below the $2.50 level.  If the latter happens, I would expect traders to want to look at the $2.00 level to see what is there but I would be surprised if we broke below it because producers have already pulled back on production.  Therefore, sub $2.00 natural gas would have to be because of a significant fall in demand.  With winter still an unknown, that is unlikely.  (But natural gas being what it is, the unexpected often happens.)

The storage prediction we have seen is for 86Bcf injection reported tomorrow but remember that different organizations have different predictions.  Some news report one number and some report the average.  I think the better way to think about it is to look at the consensus as a general idea and then watch the reaction to the actual number.  Remember two weeks ago when I pointed out that the number was lower than the consensus (a bullish number) yet the market fell off.  That indicated an underlying weakness.

The other big news is that the Bank of Canada lowered it’s benchmark rate for the first time in quite a while.  This means that the BoC is less worried about inflation and perhaps beginning to think about a recession. [WFG]

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