By: Heather Wine, Senior Risk Manager - Energy
Today’s expiring January contract settled Friday’s session higher amid thin holiday trading volume. Gains were supported by forecasts calling for colder conditions and stronger demand for the upcoming week. The spot contract settled 12.4 cents higher at $4.366, ending the week 9.6% higher, breaking the 2 week downtrend.
A colder weather pattern has emerged across the eastern US which will tighten the supply/demand balance heading into the new year. Weather models indicate colder conditions will remain in place across the NE during the 6-10 day period while above normal readings are seen from the Interior West into the Midwest, South Central and SE portions of the US.
Looking further out, the 3 to 4 week outlook favors a warmer than normal pattern continuing well into January for much of the country. Conditions in the NE and Upper Great Lakes remain uncertain and will need to be monitored.
Demand levels have surged higher this morning by nearly 20 BCF/d to 143.9 BCF/d. Temps have plunged this morning across the NE and Upper Midwest, resulting in a 13.6 BCF/d rise in heating demand to 49.9 BCF/d. Power burn is up 3.2 BCF/d while LNG feedgas demand is up 0.4 BCF/d at 18.9 BCF/day.
Source: NOAAToday’s storage report will be released at 11:00 AM CT. The report is expected to show stocks fell 168 BCF for the week ended Dec 19. This compares to last year’s draw of 98 BCF and the 5 yr avg draw of 110 BCF. If correct, stocks would fall to 3.411 TCF.
The EIA report for the week ended Dec 26 will be released on Wednesday with estimates pointing to a modest withdrawal of 49 BCF, well below both last year’s 112 BCF pull and the 5 yr avg draw of 120 BCF. The smaller draw reflects mild temperatures and thin holiday demand.
Today’s expiring January 26 natural gas contract trended back higher in last week’s trade ending a two-week downtrend.
During this two-week downtrend, the January contract lost 1.699 (31%) over 11 trading days from the early-December high down to last Monday’s 3.797 low.
From last Monday’s low, the January contract rallied higher into Friday’s close settling the week at 4.366. For the week, the contract was up .382 or 9.6%.
The near-term trend remains up with last week’s 4.593 high being primary resistance.
If 4.593 resistance is broken, 4.650-4.670 will become the next area of resistance. This resistance is the 38% retracement of the recent downtrend on the January daily chart at 4.660. It is also the 50% retracement of the daily continuation chart at 4.670. And finally, it is the 200-day moving average (4.650) on the January daily chart.
4.200 is near term support for the January contract followed by 4.000 and last week’s 3.797 low.
The February 26 contract is currently trading .530 below the price to today’s expiring January 26 contract. This will create a massive overhead gap on the daily continuation chart in tomorrow’s session.
Moving Average Alignment - Neutral
Long Term Trend Following Index – Bearish
Short Term Trend Follow Following Index - Bearish
Relative Strength Index - 53.94
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