Since my last analysis on May 19, 2023, scorching weather conditions have increased cooling demand and triggered a surge in long buying.
On May 20, Reuters reported Alberta is on high alert for wildfire upsurge over scorching holiday weekend, leading to a halt in Canadian gas production in western Canada.
Meanwhile, dry natural gas production in the Lower-48 states was close to its record high last Friday.
Additionally, the announcement on Friday revealed no change in number of natural gas rigs, which reached a 13-month low of 141. This could result in a significant movement in natural gas prices at the start of upcoming week.
Expect a gap-up opening for natural gas futures above $2.767 on the first trading session. If the price sustains above the opening level, an upward trend is likely to continue.
Technically, the 4-hour chart shows strength in the price, with a weekly close above $2.560, a high tested on April 28, indicating a potential gap-up.
Given the prevailing circumstances, including production disruptions and increased supply flow to export terminals during last week due to the Canadian fires and changing weather conditions, short-covering rallies are expected. This will be followed by fresh buying support from big bulls once natural gas futures break out above $3.248 during the upcoming week.
This trend is likely to continue, with the 200 DMA providing significant support in case of any downward movement in natural gas futures throughout this month.
Disclaimer: The author of this analysis does not have any position in natural gas futures. Readers should take a trading position at their own risk, as natural gas is one of the most liquid commodities in the world.