Selling emerged during Friday’s session after the spot month briefly traded through the $3 level. Trade was volatile as the market weighed a diminishing surplus and softer production against weakening demand. The Nov contract settled 11.6 cents lower at $2.854. For the week, prices were down 2%.
The recent recovery in prices is prompting some producers to reverse curtailments heading into winter. After hitting a low just above $3 last month, the 2024/25 winter strip has rallied more than 30 cents to its highest levels since July due to the dwindling surplus. Month to date, output is running 1.5 BCF/day below year ago levels at 101 BCF/day. The market did see a pop in production over the weekend to 101.6 BCF/day, which is applying some pressure this morning.
LNG feedgas demand has remained pretty steady, near 12.3 BCF/day, over the past week.
Maintenance work in western Canada limited exports to the West Coast and Rockies last week. The reduction is likely to impact supply and distribution in the region.
Prices are tumbling this morning as another storm aims for Florida. Hurricane Milton is currently in the GOM, about 750 miles west-southwest of Tamps. The storm is forecast to strengthen into a possible Cat 4 hurricane before making landfall Wednesday just north of Tampa Bay and will remain a hurricane as it moves across central Florida.
Early injection estimates for this week’s storage report suggest a addition of 68 BCF which compares to the 5 yr avg of 96 BCF.
Technical weakness on overbought conditions finally hit the November futures contract. After reaching a new near-term high at $3.019, prices dropped almost twenty cents, settling at $2.855 – down .116 cents. In addition, this was the first lower weekly settle in quite a while, down close to .05 cents on the week.
With speculative buying adding to bullish bets earlier in the week (funds added 14,000 contracts to a now net long position of 95,000 contracts) and an RSI over 70, natural gas prices were due for a correction. The 200-day moving average on the November 24 daily chart at $2.945 also stemmed the rally. A 50% correction form the recent rally has support at $2.760. The 10-day moving average on the continuation chart is also right at $2.800.
The uptrend in natural gas should continue as long as the September 27th $2.720 low holds. For now, further sideways action between $2.800 - $3.000 is likely.
Moving Average Alignment – Bullish
Long Term Trend Following Index – Bullish
Short Term Trend Follow Following Index - Bullish
Relative Strength Index - 63.52
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