

Spot month nat gas settled near flat yesterday with the market reversing early session gains as storage data aligned with expectations. Nat gas is on track for a weekly gain as markets have priced in a hotter pattern expected to impact much of the US while feedgas demand has strengthened. The Aug contract settled at $3.542, down 0.9 cents.

Last week’s storage injection matched expectations, coming in at 46 BCF, leaving total gas in storage at 3.052 TCF as of July 11. The year over year deficit narrowed to 156 BCF while the 5 yr avg surplus widened to 178 BCF.
Estimates for next week’s report suggest a slightly lower build of 34 BCF which would still outpace both last year and the 5 yr avg of 20 BCF and 30 BCF, respectively. The following 2 injections are likely to result in even smaller builds given forecasts for hotter conditions late July into August.
Strong output levels remain a bearish factor. Including today’s estimate of 106.7 BCF/day, production levels have averaged 106.4 BCF/day over the past week. Platts projects output will remain at an average of 106.6 BCF/day over the next 2 weeks. Month to date, output is averaging 105.9 BCF/day up 3.2 BCF/day from last year.

Gas prices continue higher this morning as strong demand is forecast for the next week. Aug futures are currently trading 5 cents higher.
Technical Analysis

The August 25 natural gas contract rallied up to a 3.629 high on Thursday but lost ground into the close finishing the day at 3.542, down 9 ticks. Thursday was the first lower close of the week.
Volume has trended lower each day of this week indicating the rally is not being strongly supported by new buying.
Trend following indicators on the 60-minute chart are setting lower highs as prices set higher highs which is not bullish longer term.
The rally may continue higher as the 50% retracement of the June-July downtrend at 3.650 has yet to be reached. If 3.650 resistance is reached and broken, the 61.8% retracement at 3.765 will become the next upside objective.
Once upside strength ends, renewed selling is expected with daily continuation chart 10, 40 and 200 day moving average support between 3.425-3.525.
A close back under moving average support will turn last week’s 3.149 low into the next area of support.
Moving Average Alignment – Neutral-Bullish
Long Term Trend Following Index – Bearish
Short Term Trend Follow Following Index - Bullish
Relative Strength Index - 53.33






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