

Gas prices continued to recover from the recent heavy sell off yesterday as forecasts turn hotter for mid July. This season’s streak of larger than normal storage injections is expected to pause with today’s estimates falling below the 5 yr avg comparison. Further supporting prices, feedgas deliveries to US LNG terminals have held steadily above 15 BCF/day over the past week as terminals come out of maintenance. Aug futures settled Wednesday’s session 7.3 cents higher at $3.488.

A lighter than normal injection is projected for today’s storage report with estimates calling for a build of 53 BCF for the week ended June 27. This compares to last year’s build of 35 BCF and the 5 yr avg build of 61 BCF. If correct, the 5 yr avg surplus would narrow for the first time since April 1. With temps moderating after last week’s record heat, estimates for the week ending July 4 suggest a build near 58 BCF. This compares to last year’s build of 61 BCF and the 5 yr avg build of 53 BCF.
Temps for mid July are turning hotter, helping boost demand expectations. Cooling degree day projections have increased for the next 2 weeks with a total of 202 CDDs expected, up from the previous day’s outlook of 178 CDDs. Gas fired power demand is reflecting the warmer forecast with the 8-14 day outlook for power burn at 49.4 BCF/day, up from today’s level of 44.9 BCF/day.

Nat gas continue to inch higher this morning as the market prices in a tighter supply/demand balance.
Technical Analysis

The August 25 natural gas contract reversed course back higher on Wednesday following a steep two-day sell off which closed an open gap on the 60-minute chart at the lower-3.300. This gap was created last week during expiration of the July 25 contract.
The August contract gained .073 on Wednesday settling at 3.488 on low volume of 115,605 contracts.
The trend at this point is mixed with offsetting short and long term trend following indexes and neutral moving average alignment. However, 10 and 40 day moving average alignment appears ready to turn bearish and overall momentum seems to be turning more negative.
There should be strong selling resistance at the 3.540-3.550 area where the 10 and 40 day moving averages have converged on the daily continuation chart.
If 3.540-3.550 resistance is reached and holds, weekly low support is at 3.293 followed by last week’s 3.199 low. Longer term support is at 3.000 and 2.750.
If 3.540-3.550 resistance is reached and broken, it will turn the near term trend back up with last week’s 3.751 high becoming the next area of resistance.
Moving Average Alignment – Neutral-Bearish
Long Term Trend Following Index – Bullish
Short Term Trend Follow Following Index - Bearish
Relative Strength Index - 49.03






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