

Nat gas prices extended Friday’s losses into Monday’s trade as weekend forecasts failed to suggest a ramp up in cooling demand. Revisions included cooler changes to the East and Midwest while the NE and northern Rockies also leaned cooler. The absence of sustained heat will allow for further expansion of the storage surplus. Further pressure stemmed from increased output and a drop in feedgas demand. July futures settled 14.9 cents lower at $3.635.

Cooling demand so far this month ranks 2nd lowest of the past 5 years. The next 5 days will continue to feature above normal temps across the West and a lack of warmth across the East. Above normal precipitation is keeping temps on the cooler side, especially in the South Central and South East regions. Conditions are expected to warm up during the 6-10 day period with the East averaging slightly above normal. No major changes are expected for the 11-15 day period with above normal temps favoring the East early on and the Interior West.
Demand levels are running below 100 BCF/day as power burn has fallen from late last week. Taking into account warming temps during the 11-15 day period, consumption levels will increase by about 5 BCF/day from current levels due mostly to rising power burn.

Production levels are coming in 2 BCF/day lower than Monday at 104 BCF/day while feedgas demand continues to hover near 14 BCF/day. Output so far this month is averaging 105.1 BCF/day, 4 BCF/day higher than a year ago.
Prices continue lower this morning as outlooks fail to show any sustained summer heat across the East. Without widespread heat, this market will have hard time breaking out to the upside.
Technical Analysis

Friday’s late-day break to a new weekly high by the July 25 natural gas contract failed to initiate follow through buying on Monday.
In Monday’s session, the July contract gapped lower on the open and was well sold into the close ending the day at 3.635, down .149 (3.9%).
Daily continuation chart 10 day moving average support held on Monday’s low and is being tested again in today’s early trade at 3.600.
A close under the 10 day average will turn the bottom of the gap created on last week’s open at 3.450 into the next area of support which coincides with the 40 day moving average at 3.410.
If 10 day moving average support holds, the last week’s 3.817 high is near term resistance followed by the 3.840 May high.
Trend following indicators remain bullish but if 10 day moving average support at 3.600 fails to hold today, the near term trend could quickly turn back down.
Moving Average Alignment – Bullish
Long Term Trend Following Index – Bullish
Short Term Trend Follow Following Index - Bullish
Relative Strength Index - 52.00






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