Nat gas prices traded in both positive and negative territory on Tuesday before settling a touch lower on the day. Reduced output and rising HDD expectations provided continued support yesterday while estimates for another injection in tomorrow's report limited the upside. The Dec contract maintained most of Monday’s gains, settling yesterday at $2.907, 1.3 cents lower on the day.
Tomorrow’s storage report is expected to show a larger than normal injection of 44 BCF for the week ended Nov 8. Despite a drop in output last week, mild temperatures left demand levels muted. If correct, the build would exceed both last year and the 5 yr avg comparisons of 41 BCF and 29 BCF, respectively. Production levels last week tightened by 1.3 BCF/day to 101.7 BCF/day. While res/comm usage increased to 18.5 BCF/day, it was still 3.5 BCF/day below the 5 yr avg for the week.
For the week in progress, estimates are currently calling for one last build of just 1 BCF. This would be bearish versus the 5 yr avg draw of 16 BCF but would fall below last year’s build of 12 BCF.
A weather pattern change is developing for the end of November. According to Maxar, the first half of the 6-10 day period will continue to see widespread above to much above normal temps across the eastern US. Temps will decline to below normal levels in Texas mid period while the Midwest also sees colder conditions. The Northern Tier will remain above normal during the 11-15 day period while a round of below normal readings extends from the South to the East Coast.
The NWS has also taken out a big portion of its above normal temps particularly during the 8-14 day period.
The market is trading lower this morning with the winter strip down 2-3 cents. Signs of increasing demand and a slow recovery in output is being offset by expectations for another bearish storage report. LNG feedgas also remains strong this morning at 14.1 BCF/day.
The December 24 natural gas contract is currently trading lower in today’s session after failing to clear 3.000 resistance on Tuesday.
Volume was heavy for a 2nd day at 245,266 contracts possibly indicating a blow off top is forming.
The December contract rallied up to a 3.013 high on Wednesday but was unable to breakout above 4 point 10-month trend line resistance at the lower-3.000 level.
With resistance holding, the trend at this point remains sideways to down.
10 day moving average support is at 2.760 today followed by the 40 day average at 2.630. The 10 and 40 day moving averages held as support on last week’s low.
The lower-3.000 area remains “breakout” resistance. A close over Tuesday’s 3.013 high will turn the October 3.159 high into the next area of resistance.
Moving Average Alignment – Bullish
Long Term Trend Following Index – Bearish
Short Term Trend Follow Following Index - Bullish
Relative Strength Index - 58.07
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