By: Heather Wine, Senior Risk Manager - Energy
4-Year price deciles Normal & Redistributed
The natural gas market has basically brushed off the extreme cold temps blanketing much of the US. Thursday’s session marked another day of losses for natural gas as the market remains focused on much warmer weather for late December while storage levels posted a lower than expected withdrawal. The Jan contract fell 33.3 cents to settle at $4.999.
The EIA reported an 87 BCF draw for the week ended Dec 16, leaving total gas in storage at 3.325 TCF. The draw fell short of expectations and marked the 3rd straight week in which the number has come in shy of historical norms. Inventories are at a 0.7% surplus to the 5 yr avg. The brutal cold weather impacting much of the US is expected to more than double the draw for the week in progress. Platts is forecasting a 201 BCF pull for the week ending Dec 23.
With average US temps predicted to be more than 17 degrees below the next few days, demand will reach record highs in some regions of the US and to multiyear highs on others. Gas demand is estimated to hit a near 4 yr high today of 136.7 BCF/day. High demand levels won’t last long though. Platts estimates usage will fall by a combined 37 BCF over the next week to 92.2 BCF/day on Dec 31.
Nat gas prices continue to drop with the spot month currently trading below the $5 level.
Natural gas prices have been in a freefall this week losing 1.601 (24%) from last Friday’s settle down to Thursday’s 4.999 close basis the January 23 contract.
Selling has continued today as the January contract retests 2 ½ year trend line support currently near 4.900.
This support held in October with the spot contract bottoming at a 4.750 low.
If trend line support does not hold, the October 4.750 low will become the next area of support.
The final 88% retracement of the October-November uptrend at 5.090 was broken on Thursday and is now the 1st area of resistance. If the January contract can close back over this resistance today, it could set the market up for a rally higher next week.
Relative Strength Index – 36.59
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