By: Heather Wine, Senior Risk Manager - Energy
Nat gas settled lower Monday on position squaring ahead of today’s Dec futures expiration while profit taking added to the downside. Dec futures settled 3.1 cents lower at $4.549 while the Jan26 contract fell 7.1 cents to settle at $4.672.
A big shift in weather is expected this week with temps expected to turn much colder across the Midwest and Mid-Atlantic and SE heading into Thanksgiving. Below to much normal readings will expand into the NE and South Central US Nov 30-Dec 4. The 11-15 day period trends warmer from the Interior West to the South while colder conditions remain in place along the Northern Tier.
Production remains at record highs of 108.8 BCF/day. The current month to date average of 107.2 BCF/day is 4.8 BCF/day higher than last year.
The EIA will release storage data a day earlier than normal this week with expectations for a 3 BCF withdrawal. This compares to the 5 yr avg pull of 25 BCF and last year’s draw of 2 BCF. For the week in progress, early estimates suggest a draw of 20 BCF which would compare to the 5 yr avg draw of 43 BCF and last year’s draw of 26 BCF.
Record LNG flows are being offset by record output. Feedgas demand is estimated at 18.7 BCF/day, up 0.4 BCF/day. Demand levels are expected to remain near this level over the next 2 weeks. Month to date, flows are averaging 18 BCF/day, up 4.5 BCF/day from last year.
Source: NOAAPrices are trading sharply lower this morning after gapping lower in the overnight session. Weather forecasts trended warmer overnight for the 2nd week of December while expectations for tomorrow’s storage report are bearish versus historical norms.
After losing .031 on Monday settling at 4.549, the spot December 25 natural gas contract is currently down over 3% after breaking out under 10 day moving average support in overnight trade.
When 10 day moving average support was broken last week, the December contract bottomed out at a 4.235 low before reversing back higher.
This time, the breakout may hold as a bearish double top reversal formed between 4.675 (last week’s high) and the 4.688 high set two weeks ago.
A breakout under last week’s 4.235 low will turn the near term trend back down with 4.000 becoming the next area of support.
The 10 day moving average broken as support overnight at 4.500 is now near term resistance. Longer term resistance is the 4.675-4.688 double top.
Moving Average Alignment - Bullish
Long Term Trend Following Index – Bullish
Short Term Trend Follow Following Index - Bearish
Relative Strength Index - 58.16
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