By: Heather Wine, Senior Risk Manager - Energy
The Feb contract skyrocketed by a record 140% over the past week in response to the arctic blast that boosted heating demand to near record levels while cutting into supply. Expiration related position squaring added to the recent volatility. Feb NG went off the board yesterday with a 50.6 cent gain at $7.46 while the March contract fell 8.8 cents to settle at $3.732. March futures are off to a stronger start this morning, up about 10 cents.
The Weather Desk’s forecast for Feb has trended much colder across the East while the West averages warmer than normal. This has increased HDD projections for Feb by 45 to a total of 830 HDDs. This is higher than last year’s total of 775.1 and above both the 10 and 30 yr norms.
Today’s storage report is expected to show a 232 BCF withdrawal for the week ended Jan 23, in between the 5 yr avg pull of 208 BCF and last year’s much larger 307 BCF withdrawal. If realized, total stocks would fall to 2.833 TCF.
The full impact of Winter Storm Fern should emerge in next week’s report, which covers the week ending Jan 30. The average estimate points to a 352 BCF withdrawal, just shy of the record 359 BCF draw. Compared to the 5 yr avg draw of 190 BCF, the 5 yr avg surplus will revert to a deficit.
Feedgas demand has been on an upward trajectory since falling to 11.3 BCF/d on Monday. Flows this morning are estimated at 18.5 BCF/d. On the flipside, res/comm usage and power burn are both down 1 BCF/d this morning. Total demand is estimated at 164.7 BCF/d, down from last weekend’s high of 178 BCF/d.
Production levels are also on the rebound as freeze offs have eased. Output is estimated by Platts this morning at 105.2 BCF/d, up 2.2 BCF/d.
Source: StoneX
The February 26 natural gas contract expiring at 7.460 on Wednesday, nearly double the price of the new front month March 26 contract which closed at 3.732.
This has created a massive upside gap on the daily continuation chart. In order to close this gap, the spot contract will need to trade up to 5.900.
The trend for the March 26 contract is up with Monday’s 4.000 high being near term resistance.
Trend line resistance drawn off the March 2025 high at 4.810 is currently at the lower-4.200 area. A breakout above this trend line would be a very bullish technical signal.
Weekly low support for the March contract is at 3.576 with longer term support at the lower-3.300 level.
Moving Average Alignment - Neutral-Bullish
Long Term Trend Following Index – Bullish
Short Term Trend Follow Following Index - Bullish
Relative Strength Index - 46.70
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