

Expiration related position squaring and a slightly cooler forecast for the start of March helped propel today’s expiring March contract on Tuesday. Expectations for another historically large withdrawal in tomorrow’s report provided further support as stocks will fall into a deeper deficit. The market reversed much of the previous day’s decline, with Mar NG settling 18 cents higher at $4.174.

An extremely cold start to the year along with production freeze offs has led to a year to date drawdown of 1.3 TCF, 270 BCF more than the 5 yr avg. Expectations for tomorrow’s storage report covering the week ended Feb 21 call for a draw of 265 BCF, which would mark the 10th largest withdrawal on record. A draw this would be nearly twice the 5 yr avg draw of 141 BCF and more than 3 times larger than last year’s pull of 86 BCF.
Another above normal draw is expected for the final week of Feb with estimates falling in the 115 to 165 BCF range. This compares to the 5 yr avg draw of 94 BCF and last year’s draw of 56 BCF.
With temps turning much warmer, production continues to claw back from last week’s near 2.5 BCF/day decline. Output this morning is estimated at 105.2 BCF/day, 0.9 BCF/day higher than Tuesday’s level. Platts projects output will remain near 105 BCF/day over the next 2 weeks. Returning supply should help offset some concern over rapidly depleting storage levels.

Prices are trading lower this morning amid robust production levels.
Technical Analysis

Today’s expiring March 25 natural gas contract rallied higher off 10 day moving average support on early weakness in Tuesday’s trade. By session’s close, the contract had gained .180 (4.5%) to close the day at 4.174.
The gap created on Monday’s lower open was closed with trade up to a 4.212 overnight high. With the gap closed, prices are again weakening.
10 day moving average support which held on Monday and Tuesday is at 3.985 today followed by 40 day moving average support at 3.730.
The 4.212 overnight high is near term resistance followed by last week’s 4.476 high.
Seasonally, natural gas prices tend to weaken into the late-February/March timeframe during which a post-winter seasonal low is typically set.
Moving Average Alignment – Bullish
Long Term Trend Following Index – Bearish
Short Term Trend Follow Following Index - Bullish
Relative Strength Index -57.40






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