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Daily Natural Gas Market Update 1-22-26

By: Heather Wine, Senior Risk Manager - Energy

StoneX Value Matrix

image-20260121213554-1

Source: StoneX Value Matrix (2), Bloomberg

Fundamentals & Weather

Expectations for massive storage withdrawals in the coming weeks given forecasts for several rounds of severe winter cold has continued to push nat gas prices higher. The recent price action has been mostly concentrated on the prompt month. Following Tuesday’s rally of more than 80 cents, the spot month surged another 96.8 cents during Wednesday’s trade.  The Feb contract is up another 65 cents this morning, trading near $5.50. 

The forecast for the next 5 days has turned even colder as of this morning with strong below normal temps projected for the central and eastern US, with the exception of Florida.  Exceptionally cold conditions will remain in place during the 6-10 day period, particularly across the lower Midwest, mid South, Mid-Atlantic and NE.  The intensity of the cold will begin to scale back during the 11-15 day period. 

image 125499

Source: Bloomberg, CME

Today’s storage report is expected to show stocks fell 106 BCF in the week ended Jan 16.  This compares with last year’s draw of 228 BCF and the 5 yr avg of 191 BCF.  If correct, stocks would total 3.079 TCF.

The intense cold snap is keeping confidence high for massive storage withdrawals over the next 2 to 3 weeks.  The current week could see stocks down 240 BCF while estimates for the week ended Jan 30 are as high as 414 BCF, which would outpace the current record withdrawal of 359 BCF in Jan 2018

image 125500

Source: StoneX

Short covering is likely to persist in the coming days given the likelihood of record breaking demand. Heating demand is up 4.2 BCF/d this morning at 48.8 BCF/d and is expected to surge toward 60 BCF/d over the next several days, with the 7 day average at 58.4 BCF/d.  

Output levels are slowly moderating, estimated this morning at 105.7 BCF/day.  Production faces downside risk this weekend as freeze offs probabilities rise, particularly across the Marcellus and Utica with potential impacts extending into the Bakken and Haynesville.  Outages could total 10 BCF/d or more. 

image 125501Source: StoneX

image-20260121213718-2

Source: Bloomberg, CME

Over the past four sessions including today, the February contract has erased all the December-January losses which amounted to 2.492 or 45%.

The February contract also broke out to a new 4-year high at 5.578 overnight but is currently trading at 5.330.

Volume yesterday came in at a massive 410,520 contracts and is currently registering 367,003 contracts in today’s early trade.

As witnessed on the December high and recently near the January low, volume tends to spike near turning points in the market.  Volume over the past two days could indicate a “blow off” top is forming.

But at this point, the trend remains firmly bullish with 6.000 and 6.490-6.500 being the next areas of resistance above the current 5.578 overnight high.

4.900 is near term support for the February contract followed by 4680-4.700.  The daily continuation chart 10-day moving average is currently at 3.700.

Moving Average Alignment - Neutral-Bullish

Long Term Trend Following Index – Bearish

Short Term Trend Follow Following Index - Bullish

Relative Strength Index - 70.26

image 125505

Source: Bloomberg, CME

image 125503

Source: Bloomberg, CME

image 125504

Source: Bloomberg, CME

image 125150

Source: Bloomberg, CME, StoneX Value Matrix (2)

image 125149

Source: Bloomberg, CME, StoneX Value Matrix (2)

Forward Curve Pricing

image 125502

Source: Bloomberg, CME

Disclaimer
(1)  The StoneX Commodity Indicator provides an overall view of market sentiment for a commodity based on the quantification of fundamental, technical and historical market data related to that commodity.  The StoneX Commodity Indicator History graphically represents each day’s actual very bearish to very bullish signal.  This history contains the sum of all factors, excluding weather forecasts.
(2) The StoneX Value Matrix provides a measure of historical value by analyzing historical price data distributed into 10 deciles. The prices are adjusted for inflation using the Producer Price Index (PPI) published by the U.S. Bureau of Labor Statistics.
 

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