

Following Monday’s hefty gains, gas futures traded back down on Tuesday as weather models were showing some disagreement regarding the extent of this month’s cold. American models trended colder over the next 2 weeks, adding in 2 HDDs while EU models trended warmer with the removal of 8 HDDs. Temps will still remain below normal, keeping heating demand strong. The Feb contract settled Tuesday’s trade 22.3 cents lower at $3.449.

The weekly EIA storage report will be released today at 11am CT. Estimates call for a lower than normal pull of 53 BCF, which compares bearishly to last year’s draw of 104 BCF and the 5 yr avg draw of 93 BCF. Stocks are expected to draw down at a faster than normal pace as we move further into January. Current estimates suggest stocks could fall by a combined 600 BCF for the weeks ending Jan 10th, 17th and 24th.
Heating demand continued to push higher yesterday, rising 2.9 BCF/day to 55.3 BCF/day. According to Platts, heating demand is up another 2 BCF/day today at 57.3 BCF/day. The increase has pushed total demand up to 160.8 BCF/day. Feedgas demand fell to 14.6 BCF/day on Tuesday and remains at that level today.
Operational flow orders have been issued by several pipeline companies as the cold weather impacts systems. Daily production has fallen to an 8 week low of 99.8 BCF/day today on freeze offs. With the coldest temps yet to arrive, freeze offs could increase in the coming days.

Prices have surged higher this morning amid strong weather driven demand while production freeze offs are limiting supply. This is outweighing expectations for a lighter than normal storage withdrawal. The spot month contract is currently trading about 5% higher on the day.
Technical Analysis

See-saw price action in the natural gas market over the course of this week. After gaining over .300 in Monday’s session, the February 25 natural gas contract sold back off on Tuesday losing .223 (6%) on Tuesday to settle at 3.449.
Prices have reversed back higher today with the February contract currently up .147 at 3.598.
The 10 day moving average which held as resistance in Monday and Tuesday’s sessions is being tested again today at 3.650.
A breakout above the 10 day average will turn the near term trend back up with 4.000 and last week’s 4.201 high becoming the next areas of resistance.
If 10 day moving average resistance holds again, weekly low support is at 3.354 which coincides with the 40 day moving average at 3.315. If 3.315 support is broken, the lower-3.000 area will become the next area of support.
Moving Average Alignment – Neutral-Bullish
Long Term Trend Following Index – Bullish
Short Term Trend Follow Following Index - Bearish
Relative Strength Index - 53.19






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