By: Heather Wine, Senior Risk Manager - Energy
4-Year price deciles Normal & Redistributed
Following last week’s 9% loss, nat gas prices started the new week with a decent rebound. The Oct contract settled up 25.3 cents at $8.249. Prices were mostly pushed higher by supportive technicals while slightly lower production estimates for the week also contributed to the gain.
Cooler, shoulder season temps have moved into much of the US with California also seeing a cooldown from the recent heat wave. Milder weather has weighed on gas fired power demand which fell to 37.6 BCF/day yesterday, down 8.5 BCF/day from the average over the past 2 weeks. Power burns should continue to ease through the weekend before rising back above 40 BCF/day early next week.
Production levels have been averaging 96.6 BCF/day since mid-July, according to Platts. The largest gains have come from offshore fields in the GOM. Fears are rising that falling prices over the past 3 weeks might discourage high production rates to continue which has led to buying back into the market.
The October 22 natural gas contract rallied higher on Monday following three consecutive lower weekly closes gaining .253 (3.2%) to close the day at 8.249.
Overnight strength has the October contract testing a key area of resistance at the lower-8.500 area where the 10 and 40 day moving averages have converged.
If resistance holds as expected, the selloff should resume.
7.750 is weekly low support followed by 7.500-7.530. If 7.500 support is broken, the 200 day moving average currently at 6.280 will become the next downside objective.
A breakout above lower-8.500 resistance will and the 38% retracement of the recent downtrend at 8.600 will become the next area of resistance.
The 10 day moving average has bearishly crossed under the 40 day average.
Moving Average Alignment – Neutral-Bearish
Long Term Trend Following Index – Bullish
Short Term Trend Following Index – Bearish
Relative Strength Index – 47.31
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