By: Heather Wine, Senior Risk Manager - Energy
The spot month settled about unchanged on Thursday, maintaining the previous day’s loss of nearly 30 cents. A lower than expected withdrawal weighed on prices, offsetting forecasts for colder temps and stronger heating demand next week. Reduced LNG flows also lent pressure while counterbalancing a slight decline in output. The Feb contract settled .008 higher at $3.128.
Conditions are expected to turn sharply colder across the Midwest this weekend with a stretch of below normal temps projected over the next 2 weeks. The most significant cold arrives early next week, marking the coldest period in the forecast. The 15 day outlook currently ranks as the 15th coldest for this timeframe, reinforcing the probability for elevated heating demand later this month.
LNG feedgas demand is slowly recovering after falling to 11 week lows midweek. Flows rebounded by 0.4 BCF/d yesterday to 16.8 BCF/d, led by higher deliveries to Freeport, where flows rose 1.2 BCF/d. Demand at Corpus Christi remained subdued on Thursday as maintenance continued on the Sinton compressor station.
Early estimates this morning point to further improvement with total feedgas demand up 2.2 BCF/d to 19 BCF/d.
Commissioning activity is progressing at Golden Pass which will become the 9th major US LNG export terminal. The terminal is likely to load its first cargo in March.
Coming in lower than expectations and historical levels, the EIA reported a 71 BCF withdrawal for the week ended Jan 9. The draw was 19 BCF lower than expected and left total gas in storage at 3.185 TCF. Stocks are now 33 BCF higher than last year and 106 BCF above the 5 yr avg.
The 5 yr avg surplus is expected to widen further in next week’s report as current withdrawal estimates run about 80 BCF below the seasonal norm.
Source: StoneXEarly morning losses are beginning to fade with the spot trading a touch higher on the day ahead of the storage report.
A near term low may finally be in place after the spot February 26 contract traded down to a 3.006 low on Thursday but closed the session at 3.128, up 8 ticks.
A final gap from mid-October on the daily continuation chart 3.025 was closed on Thursday followed by a higher close on the session which formed a potentially bullish hammer Japanese candlestick.
Three bullish divergences (lower price low, higher index high) had formed on the 60-minute chart warning a low was near.
To turn the trend back up, the February contract will need to break out first over 10 -day moving average at 3.320 followed by the 200-day average at 3.530. A close above both moving averages will indicate a low is in place.
If Thursday’s 3.006 low is broken as support, 2.890-2.900 will become the next downside support.
Moving Average Alignment - Neutral-Bearish
Long Term Trend Following Index – Bearish
Short Term Trend Follow Following Index - Bearish
Relative Strength Index - 36.78
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