Tomorrow’s expiring June futures contract continued to sink heading into the long weekend after an early session rally failed to hold. The retreat was again driven mostly by profit taking as the spot month contract had been in massive overbought territory. Supportive fundamentals had driven prices up to a near 4 month high prior to Friday's late morning pull back. June futures settled 13.7 cents lower on the day at $2.52. For the week, prices fell 4% after rising about 63% over the previous 3 weeks.
Output did trend higher on Friday, rising to 101.9 BCF/day after falling to near 4 month lows during early May. Overall, production is still down about 8% this year following lower drilling activity and delayed well completions.
According to Baker Hughes, gas drilling rigs fell by 4 last week to just 99 rigs, the lowest level since Oct 2021. Gas drilling rigs are down 38 rigs year over year. Changes in drilling activity take time to impact output levels thus it remains to be seen if drillers will produce more gas following this month’s rally.
A pick up in output is being offset by strengthening LNG feedgas demand. Feedgas demand rose to 13.3 BCF/day on Monday and is estimated this morning at 13.4 BCF/day. Demand should rise even further once spring maintenance concludes at Elba Island and other plants in Louisiana.
Prices are trading near flat this morning on mixed weather outlooks and stronger output over the holiday weekend. Output averaged about 101.4 BCF/day over the 3 day weekend and is coming in this morning at 101.2 BCF/day.
Hotter trends are expected next week across much of the country with the warmest readings expected in the Interior West. Temps for the second week of June however will not be as hot over the eastern 1/3 of the US with mostly comfortable temps expected across the Great Lakes and Ohio Valley. At the same time, very warm to hot temps will continue across the West and South. The next 15 days are forecast to yield 105.7 CDDs which is in line with the 10 yr avg.
The June 24 natural gas contract closed down for a 2nd consecutive day on Friday losing .137 to close the day at 2.52.
For the week, the June contract lost 4% closing down on a weekly basis for the 1st time in 4 weeks.
Volume over the past two sessions has been very low with Friday’s volume at just 46,607 contracts. This could be holiday-related or it could indicate profit-taking on recent weakness.
Daily settle on Friday under the 10 day moving average was the first daily close under this average since the market bottomed in late-April.
The 200 day moving average at 2.455 is the next area of support followed by the 38.1% retracement of the one month uptrend at 2.375.
The 10 day moving average is now near term resistance at 2.570 followed by last week’s 2.924 high.
Moving Average Alignment – Neutral-Bullish
Long Term Trend Following Index – Bullish
Short Term Trend Follow Following Index - Bullish
Relative Strength Index -60.32
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