

Nat gas prices rallied to start the new week with support stemming from colder temps moving into the Northern US that will remain in place over the next 10 days. The potential for possible production disruptions due to freeze offs was also supportive. LNG exports remain near record highs at 15.6 BCF/day. March NG settled 13.5 cents higher at $3.444.

The market is factoring in the possibility that frigid temps, which are expected to intensify this week, could result in freeze offs in the Rockies, Bakken and possibly Appalachia. Production impacts are however likely to be limited to northern regions.
Production has fallen to a 2 week low this morning, driven by the Texas and NE regions. Dry output is estimated at 104.6 BCF/day, down 0.8 BCF/day from yesterday's level.
Forecasts yesterday added in 8.8 HDDs, leaving the 15 day forecasted total at 462.2 HDDs. This is higher than the 10 yr norm and ranks 8th coldest for the period.
Gas prices have climbed further this morning as several cold weather systems will be moving through the North and Central US into the East, driving up heating demand. This will in turn, further deplete storage levels. Forecasts have also have added an additional 15.7 HDDs. A milder weather pattern should return during the last week of February.

This week’s storage report is expected to show a draw of 90 BCF for the week ended Feb 7 which would be lower than the 5 yr avg draw of 144 BCF. The following 2 withdrawals are however likely to be above normal given the return of colder conditions.
Technical Analysis

The March 25 natural gas contract gapped over 10 day moving average resistance on Monday to begin the new week of trade.
By day’s end, the contract was up .135 (4.1%) closing the session at 3.444. Volume was moderate at 203,924 contracts.
The 38% retracement resistance calculated from the 4.369 January high to the 2.990 January low at 3.515 has been reached in today’s early trade.
If 3.515 resistance is broken, the 50% retracement at 3.680 will become the next upside objective.
The 3.680 retracement resistance is very close to the 40 day moving average currently at 3.620 and will be an important resistance area if reached.
10 day moving average support is at 3.325 today with longer term support at 2.990-3.000 where the March contract bottomed in late-January.
Trend following indicators remain in a bearish positioning suggesting current strength may not last.
Moving Average Alignment – Neutral-Bearish
Long Term Trend Following Index – Bearish
Short Term Trend Follow Following Index - Bearish
Relative Strength Index -49.92






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