

Following a volatile trading pattern last week, natural gas prices ended the week on a strong note. The market surged on Friday following a volatile session amid changing supply/demand factors and a technical breakout. Oct futures settled 8.6 cents higher at $2.434.

The natural gas rig count declined by 1 last week to 96 total rigs, 22 rigs lower than a year ago.
Production levels lagged much of last week with levels struggling to get above the 100 BCF/day mark. Output in the week ended Sep 19 averaged 99.4 BCF/day, the lowest weekly output since January. Friday’s output level marked the highest of last week, at 100.5 BCF/day. Production levels over the weekend hovered at to slightly above 100 BCF/day. Today's output is estimated at 100.2 BCF/day.
Feedgas demand will see near term declines, particularly in the NE region as the Cove Point LNG facility went offline on Friday for annual maintenance. Feedgas nominations there fell to 15 MMcf/day on Friday, down from levels of more than 700 MMcf/day. The outage is scheduled to continue until Oct 10.
Weather related demand should be light this week amid easing cooling demand across the Midwest and East.

Prices are flying higher this morning with the spot month up more than 5% amid a technical breakout and the potential for another storm in the Gulf this week that could disrupt production. Expectations for a substantial narrowing of the storage surplus over the next 3 weeks is also providing support.

A bullish breakout on Friday by the October 24 natural gas contract after closing above 2.400-2.410 resistance.
This resistance held on several breakout attempts over the past two weeks but was finally broken on Friday as the October contract settled the day at 2.434.
For the week, the contract was up .129 (5.6%) closing up on a weekly basis for a 4th consecutive week.
The 50% retracement of the June-July downtrend at 2.500 is being tested in today’s early trade.
If 2.500 resistance is broken, the 61.8% retracement at 2.650 will become the next area of resistance.
Former resistance at 2.400-2.410 is now near term support followed by the 10 day moving average at 2.345.
Moving Average Alignment – Neutral-Bullish
Long Term Trend Following Index – Bullish
Short Term Trend Follow Following Index - Bullish
Relative Strength Index - 65.04






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