

Pushing lower for a 2nd straight day, the spot month nat gas contract plunged 6% in yesterday’s trade. The decline was driven by continued evidence of milder weather heading into February, which is dampening demand expectations. Today’s expiring Feb contract settled 22.6 cents lower at $3.471. March futures traded at a record high discount to April yesterday, indicating the market has given up on winter weather.

Tomorrow’s storage report could reveal one of the largest ever storage withdrawals, which would flip the long standing 5 yr avg surplus into a deficit. Platts is calling for a pull of 305 BCF for the week ended Jan 24 while Reuters is calling for a draw of 317 BCF. The estimates are well above the 5 yr avg withdrawal of 189 BCF and last year’s draw of 234 BCF. Last week saw a significant tightening in fundamentals of just over 18 BCF/day from the week prior. Early estimates for the week in progress suggest another larger than normal draw in the 205 to 230 BCF range.
Output has continued to recover from last week’s lows, maintaining 102 BCF/day or higher so far this week. Month to date, output is averaging about 0.5 BCF/day stronger than last year at 101.7 BCF/day.
Production outlooks for 2025 suggest producers will be in a holding pattern with limited growth in spending while 2026 should see stronger drilling activity and higher output. Current prices are not high enough to significantly boost drilling activity, particularly in the Haynesville with drilling there up from recent lows but about 35% lower than a year ago. Most of this year’s growth is expected to come from Appalachia.

Prices are currently trading mixed prior to today's expiration. Market sentiment remains weak given expectations for light heating demand over the next 2 weeks. Weekly storage data could provide some near term support.
Technical Analysis

Today’s expiring February 25 natural gas contract was heavily sold for a 2nd day on Tuesday losing .226 (6.5%) to close the day at 3.471. Over the past two sessions, the February contract has lost .556 or 13.8%.
Volume was surprisingly low at 63,816 contracts, roughly a 1/3rd of daily volume registered earlier in the month.
40 day moving average support at 3.600 and the 38% retracement support of the 2024-2025 uptrend at 3.410 were broken as support on Tuesday indicating a winter high is in place.
The next areas of support are at 3.090-3.100 and 3.000. Longer term support is the 50% retracement of the 2024-2025 uptrend at 2.925.
The March 25 contract, which will become the spot contract tomorrow, is currently trading .300 below the price of the expiring February 25 contract. This should create a massive overhead gap on the daily continuation chart tomorrow.
Moving Average Alignment – Neutral
Long Term Trend Following Index – Bearish
Short Term Trend Follow Following Index - Bearish
Relative Strength Index -43.30






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