Nat gas prices extended the downside yesterday with the spot month falling another 10.2 cents to settle at $3.533. A lack of sustained heat across the East resulting in light weather demand along with depressed LNG feedgas demand has continued to weigh on this market. Additional pressure is stemming from expectations for another hefty injection.
Another robust injection is expected in tomorrow’s storage report with Platts calling for a build of 108 BCF with Reuters projecting an injection of 105 BCF. Either way, the number would outpace last year’s build of 77 BCF and the 5 yr avg build of 87 BCF. The number would mark the 7th straight triple digit build, the longest such streak since 2014.
The market balance tightened last week by about 1.4 BCF/day amid rising power burn and lower production which were slightly offset by a decline in res/comm and LNG feedgas demand. Injection estimates for the week in progress suggest a build of 86 BCF which would end the string of triple digit builds but would still outperform the 5yr avg of 72 BCF.
The EIA’s June STEO shows domestic consumption and exports will increase by a combined 4 BCF/day this year with dry output rising by less than 3 BCF/day. The agency projects demand will consistently outpace supply much of the year, sending supplies back below the 5 yr avg prior to heating season.
Day over day, total consumption is down 1.5 BCF/day this morning at 98.8 BCF/day as power burn, res/comm and industrial sector demand levels are all lower on the day. Feedgas demand is up slightly at 14.1 BCF/day. Consumption levels are expected to climb back towards 103 BCF/day during the 8-14 day period as temps heat up.
Prices are trading higher this morning as the market looks ahead to a warm up during the 3rd week of June. Feedgas demand at Cameron LNG is also inching higher which could indicate that maintenance is nearing conclusion.
Technical Analysis
The July 25 natural gas contract was heavily sold for a 2nd day on Tuesday closing the session at 3.533.
Over the past two sessions, the July contract has lost .251 (6.6%) while also breaking out under daily continuation chart 10 day moving average support on Tuesday.
This former support is being tested as resistance at 3.635 in today’s early trade. If resistance holds, prices should swing back lower.
The 3.510 overnight low is near term support followed by 3.450 which will close a 60-minute chart gap created last Monday.
Longer term support levels are the 40 day moving average at 3.415 followed by the 200 day average at 3.295. The final support above 3.000 is another 60-minute chart gap created during expiration of the June 25 contract at 3.200.
If the July contract trends back over 10 day moving average resistance at 3.635, it will be a bullish technical signal turning last week’s 3.817 high into the next area of resistance.
Moving Average Alignment – Neutral-Bullish
Long Term Trend Following Index – Bullish
Short Term Trend Follow Following Index - Bullish
Relative Strength Index - 51.66
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