Natural Gas Futures Drop 10% and Signal Possible New Lows – 07 April

After a break from three consecutive weeks of deficit last week, U.S. natural gas futures returned to their weekly trend in the negative, ending the current week down about 10%.

The front-month contract just fell below the crucial $2 support, serving as a reminder that new lows may be struck in the coming days and adding to the bearish sentiment of longs in the market.

On the Henry Hub of the New York Mercantile Exchange, natural gas for May delivery settled at $2.0110 per MMBtu, or metric million British thermal units, down 14.4 cents, or 6.7%, on the day.

The front month dropped 9.3% for the week. It has lost a net 33% over the last five weeks.

Natural gas prices may rise in the upcoming week, according to technical readings, but the front-month must maintain above $2.17, according to Sunil Kumar Dixit, head technical strategist at SKCharting.com. If that level holds, additional gains are possible, clearing $2.30 to provide room for a test of the $2.60 resistance. The most recent weekly drop in gas prices followed the release of a government report that showed natural gas storage in the United States fell slightly below expected levels last week as steadier heating demand was caused by cooler-than-normal weather historically.

The abnormally high storage has caused a selloff in petrol futures since late last year, driving the benchmark front-month on the Henry Hub of the New York Mercantile Exchange down from 14-year highs of $10 in August to current prices of roughly $2.