March futures moved lower Thursday, despite the EIA revealing its 4th ever 300+ BCF withdrawal. While weekly data aligned with expectations, it pushed inventories into a 4% deficit versus the 5 yr avg. The market had largely anticipated a significant draw, causing the market to quickly sell off following a brief move higher. Prices continued to retreat for the remainder of the session with pressure persisting from a mild weather outlook for the first 10 days of February. March NG settled 12.3 cents lower at $3.047.
The EIA reported a 321 BCF withdrawal for the week ended Jan 24, leaving total gas in storage at 2.571 TCF. While the draw fell short of the all-time record high of 359 BCF, it was significantly higher than historical comparisons, flipping the long standing surplus into a deficit. Stocks are now 111 BCF below the 5 yr avg and 144 BCF below last year.
Withdrawals are likely to be smaller in the coming weeks as weather outlooks continue to support a mild first half of February. For the week ending Jan 31, a withdrawal in the 190-210 BCF range is expected, which compares to the 5 yr avg draw of 174 BCF and last year’s pull of 110 BCF.
Over the next 5 days, much of the US is expected to experience much warmer than normal temps with the exception of the NW, which will average colder than normal. The extent of the warmth is expected to scale back during the 6-10 day period with more of the NW experiencing below normal conditions. Looking ahead to the 8-14 day period, below normal conditions are forecast to cover much of the US except for the South Central region, Southeast and parts of the East Coast which will remain above normal.
The market appears unfazed by the anticipated return of colder temps during mid February as the spot month continues to trade lower. The downward pressure is likely driven by a rebound in production from last week's low. Platts estimates output at 105.7 BCF for today.
Technical Analysis
The new front month March 25 natural gas contract was heavily sold again on Thursday losing .123 (3.9%) to close the day at 3.047.
Volume spiked to a 7-session high registering 201,741 contracts.
The primary trend remains down but short-covering ahead of the weekend could become a bullish factor if 3.000 support holds in today’s early trade.
3.000 is the next support followed by 2.925, the 50% retracement support of the 2024-2025 uptrend. If 2.925 support is broken, the daily continuation chart 200 day moving average at 2.690 will become the next area of support.
3.090-3.100 is near term resistance followed by 3.310 which will close the gap created during expiration of the February 25 contract on Wednesday.
Moving Average Alignment – Neutral - Bearish
Long Term Trend Following Index – Bearish
Short Term Trend Follow Following Index - Bearish
Relative Strength Index -36.45
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