By: Heather Wine, Senior Risk Manager - Energy
The spot month nat gas contract fell to 5 month lows Thursday after storage data indicated a significant loosening in the supply/demand balance last week. The lower than normal draw nearly erased the 5 yr avg storage deficit. Forecasts calling for extremely mild conditions mid to late next week are dampening heating demand expectations which weighed further on prices. The April contract settled 4.1 cents lower at $2.827.
Prices moved higher overnight as forecasts point to a cold spell across the northern US this weekend into next week, boosting heating demand expectations. A projected pattern change toward milder conditions later next week is limiting upside momentum this morning.
Storage withdrawals slowed sharply last week as mild temps reduced heating demand to seasonally low levels. The EIA reported a 52 BCF draw for the week ended Feb 20, below both the average estimate and historical norms. Total gas in storage stands at 2.018 TCF, 141 BCF above last year and just 7 BCF below the 5 yr avg.
A much larger withdrawal of 134 BCF is projected for the current week following the recent cold spell across the Midwest and East. A mid March warm up combined with strong production is expected to shift withdrawals to injections by mid month, likely resulting in a solid spring surplus.
Early March heating demand appears to be fading as forecasts call for above to much above normal conditions nationwide during the 6-10 day period. The 8-14 day period trends closer to normal temps across the Interior West while the East Coast is expected to remain much warmer than normal.
Heating demand is currently running at 29.5 BCF/d with the next 7 days projected to average 33.9 BCF/d. Res/comm usage will ease to 25.7 BCF/d during the 8-14 day period.
Source: NOAA
The new front month April 26 natural gas contract has rebounded in today’s early trade after falling to a new 6-month spot contract low at 2.775 in Thursday’s session.
The 2.775 low was technically important as it closed a downside gap on the April 26 daily chart from mid-January.
The trend remains sideways to down with the April contract low at 2.604 being the next support under Thursday’s 2.775 low.
Long term trend line support which marked the 2025 post-winter low at 2.858 and the 2025 spot contract low at 2.662 is currently near 2.500. This should be a key support area, if reached.
2.940 will close an open gap on the daily continuation chart created during the March expiration on Wednesday and is near term resistance.
Daily continuation chart 10-day moving average resistance is at 2.990. A close above this average will turn the near term and possibly longer-term market trend back higher.
Moving Average Alignment - Neutral-Bearish
Long Term Trend Following Index – Bearish
Short Term Trend Follow Following Index - Bearish
Relative Strength Index -40.21
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