Spot month gas prices surged to a 2 yr high during Sunday’s night trade as the supply/demand balance grows tighter. Those gains however were erased throughout Monday’s session. This market continues to pay very close attention to weather forecasts for the second half of January with any changes swaying price direction. Weather models have taken out some HDDs late in the 2 week period however extreme cold is still expected to impact much of the country early next week. Feb futures settled Monday’s session down 5.5 cents at $3.934.
A strong mass of cold air is on track to bring the coldest temps of the season to date to much of the Eastern 2/3 of the US early next week. This morning’s outlook trended colder in Texas and the Interior West while slightly warmer in the Midwest. The cold should ease, becoming more confined to the South and East, late in the 6-10 day period. The forecast ranks 5th coldest for the period.
Prices are trading lower this morning as the 11-15 day weather outlook has turned less extreme. Maxar is still predicting below and much below normal temps across the Rockies while early below normal readings across the East give way to a round of above normal temps mid to late period.
Output levels have remained steady since Sunday, coming in at 102.3 BCF/day. Freeze offs are expected to impact supply over the coming 7 to 10 days. Extreme cold could result in freeze offs pushing above 10 BCF/day.
LNG feedgas demand has risen to 15.1 BCF/day this morning. Flows are down from last week’s highs due to a reported outage at Freeport.
Prices are currently trading lower as the risk of extreme cold lessens following next week’s cold snap. The market is also looking ahead to warmer temps come February.
Technical Analysis
The February 25 natural gas contract gapped up to a new 2-year high on Monday’s open topping out at a 4.369 morning high.
Sellers used the early strength to sell the February contract down into the close which finished the day at 3.934, down .055.
There have been two breakout attempts over the 4.000 area over the past three weeks. In both occasions including yesterday, the spot contract failed to close above the 4.000 level.
A bearish divergence also appears to be forming between yesterday’s higher price high and a lower high on the RSI index.
Overnight selling has dropped the February contract toward daily continuation chart 10 day moving average support at 3.685.
If the 10 day average is broken, the 40 day moving average at 3.415 will become the next area of support.
4.000 is near term resistance followed by Monday’s 4.369 high. Longer term resistance is the November 2014 high at 4.544.
Moving Average Alignment – Bullish
Long Term Trend Following Index – Bullish
Short Term Trend Follow Following Index - Bullish
Relative Strength Index -55.52
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