

Nat gas prices declined heading into the weekend, pressured by mild weather, a growing supply surplus and weakening demand. Consumption has trended lower amid the absence of summer heat across the East while the onset of annual maintenance at Sabine Pass is further curtailing demand. July nat gas settled 7.5 cents lower Friday at $3.447.

After showing signs of recovery last week, output levels have pulled back with volumes falling to 105.2 BCF/day today. The decline appears to be a bullish catalyst, helping drive prices higher this morning while overshadowing the drop in feedgas demand.
Gas demand fell Friday to 97.2 BCF/day , down from Thursday’s 100.8 BCF/day with much of the decline driven by a drop in LNG feedgas demand. Volumes fell by 1 BCF/day to 13.7 BCF/day as Sabine Pass began annual maintenance on 2 of its 6 liquefaction trains. Maintenance on the Creole Pipeline that feeds Sabine Pass is also restricting flows with the work expected to last until June 22. The end of maintenance at Cameron LNG along with strong volumes at Plaquemines should help offset lost demand from Sabine Pass.

Prices have gapped higher this morning with the spot month currently up 25 cents. Short covering, the decline in production and a surge in crude oil prices are all contributing to the upside.
Technical Analysis

The new front month July 25 natural gas contract lost .278 (7.5%) in last week’s holiday-shortened trade closing Friday at 3.447.
The July contract has gapped higher by .054 from Friday’s close to begin the new week of trade currently up .220 at 3.667.
The 40 day moving average on the July contract chart at 3.725 is near term resistance.
If 3.725 resistance is broken, the 3.840 high set three weeks ago will become the next area of resistance followed by 4.000.
There is a confluence of support at the 3.370-3.400 area with longer term support at 3.200.
3.200 is the bottom of the open gap created last week during expiration of the June contract. At some point, this gap will be closed and will remain a bearish indicator as long as it remains open.
Trade should remain choppy and volatile as the summer cooling season nears.
Moving Average Alignment – Neutral-Bullish
Long Term Trend Following Index – Bullish
Short Term Trend Follow Following Index - Bullish
Relative Strength Index - 56.23






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