Nat gas prices jumped higher Wednesday in anticipation of historic cold next week along with a surge in feedgas demand. The market had a relatively subdued response to the weekly storage report as data aligned with expectations. Much of the day’s gains materialized midday after forecasts trended even colder. The Feb contract settled with a 17.5 cent gain to settle at $4.258.
As expected, storage levels fell a massive 258 BCF during the week ended Jan 10, leaving total gas in storage at 3.115 TCF. The draw was more than twice the 5 yr avg pull of 128 BCF and higher than last year’s draw of 150 BCF. The 5 yr avg surplus fell from 207 BCF the previous week down to 77 BCF while the year over year surplus sits at 111 BCF. The South Central region saw the largest decline of 93 BCF, which included a 38 BCF drop in salt storage. The Midwest region declined 73 BCF while the East fell by 68 BCF.
A heavy reliance on storage will continue to impact upcoming storage reports. Early estimates for next week’s report range from withdrawals of 195 BCF to 269 BCF with an avg estimate of 240 BCF. For the week ending Jan 24, a record draw above 300 BCF is possible.
LNG feedgas demand remains near record highs as a ramp up at Plaquemines rapidly progresses. Plaquemines was on track to receive 1.2 BCF/day yesterday, up 0.2 BCF/day from the 1 week average. Higher gas flows were also due to a rebound at Freeport LNG to more than 2.4 BCF/day, up from Jan 13’s level of 1.6 BCF/day. Strong netbacks from end user market and low shipping rates are also incentivizing high utilization at LNG facilities. Feedgas demand this morning is pegged at 15.7 BCF/day.
The next 5 days will be extremely cold as an arctic air mass descends into the US from Canada. Lows below zero will occur in the Plains, Midwest and Interior NE while falling into the 20’s as far south as Houston. Maxar predicts 3 greater than 40 HDDs for Jan 20-22, peaking at 46.31 on Jan 21, which would be the 2nd coldest day of the last 10 years.
The Feb contract is currently trading more than 20 cents lower on the day as revised weather outlooks showing less extreme cold during the 11-15 day period has led to profit taking.
Technical Analysis
The spot February 25 natural gas contract rallied higher on Thursday from a 4.000 low to a 4.258 close over the final two hours of trade, up .175 (4.3%) for the day.
Nearly all of Thursday’s gains have been erased in today’s early trade as the February contract is currently down .150+ near 4.100.
The primary trend remains up although a bearish divergence has formed on the daily RSI index (higher price high, lower index high) which could warn a top is forming.
4.000 is near term support followed by the 10 day moving average at 3.880. Longer term 40 day moving average support is at 3.510 today.
A breakout above Monday’s 4.369 high will turn the November 2014 high at 4.544 into the next area of resistance.
Moving Average Alignment – Bullish
Long Term Trend Following Index – Bullish
Short Term Trend Follow Following Index - Bullish
Relative Strength Index -59.39
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