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Daily Natural Gas Market Update 8-21-24

By: Heather Wine, Senior Risk Manager - Energy

Daily Natural Gas Market Update
 
Heather Wine
Senior Risk Manager | (312) 373-8250StoneX Financial Inc. - FCM Division Heather.Wine@stonex.com
StoneX Value Matrix
image-20240820230408-1
Source: StoneX Value Matrix (2), Bloomberg
StoneX Market Indicator
image-20240820230422-2
Source:  StoneX Market Indicator (1), Bloomberg
Fundamentals & Weather

Nat gas attempted to rally yesterday but pulled back after failing to break through major resistance levels.  Fundamentally, a decline in cooling degree days during the 11-15 day period suggested weaker demand than previously expected. Expectations for a lower than normal build and declining output kept the downside limited.  Sep futures settled with a loss of 3.7 cents at $2.198.

 

image 99246
Source: Bloomberg, CME

The storage surplus has steadily declined this summer, falling by more than 300 BCF since peaking at 678 BCF in March.  The next few storage reports are expected to see that trend continue.

Following last week’s surprise withdrawal, a build of 32 BCF is expected for the week ended Aug 16.  A build this size would trail the 5 yr avg injection of 41 BCF but would be higher than last year’s build of 23 BCF.  Early estimates for the week ending Aug 26 suggest a build of about 23 BCF, 20 BCF lower than the 5 yr avg comparison. 

image 99247​​​
Source: Bloomberg

Production dipped yesterday back toward mid June lows amid production curtailments in the Appalachia and Haynesville.  Early cycle data showed output fell to 100.3 BCF/day.  Gas production in the Appalachia is down 1.9 BCF/day from its late July high while Haynesville output has fallen about 500 MMcf/day over the past 3 weeks.

Output so far this month is averaging 102.3 BCF/day, down from July’s average of 103.4 BCF/day.  The ongoing decline in output combined with the shrinking surplus is supportive for the market.   

​​image 99248
Source: NOAA

The market is trading lower this morning but remains rangebound.  Power burn is down 3.3 BCF/day according to Platts while res/comm demand is up 2.7 BCF/day.  LNG feedgas is about flat on the day at 12.9 BCF.

Technical Analysis 
 
image-20240820230522-3
Source: Bloomberg, CME

The September 24 natural gas contract on Tuesday tried to breakout above 2.301 resistance set last week reaching a 2.278 morning high.  

But with resistance holding, the contract pulled back into the close settling the day at 2.198, down .037.

Trend following indicators remain mixed as the market trades in a sideways to higher range from the July 1.856 low.

2.301 extending up to 2.350, the 38% retracement of the June-July downtrend, remains primary resistance.

A breakout above 2.350 will turn the 50% retracement at 2.500 into the next upside objective.

Weekly low support is at 2.097 followed by trend line support off the July 1.856 low near the 2.000 level. Longer term support is the 1.856 July low.

Moving Average Alignment – Bearish
Long Term Trend Following Index – Bearish
Short Term Trend Follow Following Index - Bullish

Relative Strength Index -51.08

image 99250
Source: Bloomberg, CME
image 99252
Source: Bloomberg, CME
image 99251
Source: Bloomberg, CME
image 98883
Source: Bloomberg, CME, StoneX Value Matrix (2)
image 98884
Source: Bloomberg, CME, StoneX Value Matrix (2)
Forward Curve Pricing
image 99249
Source: Bloomberg, CME
 
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