

The nat gas market continues to display extremely volatile trade with the spot month tacking on big gains yesterday as below normal temps and winter storms impacted much of the eastern US. The cold is driving up heating demand which is likely to result in a massive reduction in storage levels over the next 2 weeks. Output is also on the decline amid freezing pipes and wells. The spot month contract settled 31.8 cents higher at $3.672.

This week’s storage report is expected to show a smaller than normal withdrawal given last week’s mostly mild temps across the central and eastern US. Platts is calling for a pull of 41 BCF which would be bearish compared to last year’s draw of 140 BCF and the 5 yr avg draw of 67 BCF. Weekly storage data will be released a day early this week at 11am CT.
Severe cold is expected to result in potentially historic withdrawals totaling well over 500 BCF over the next 2 weeks. Expectations for the week in progress suggest a drawdown near 275 BCF.
Prices are trading lower this morning as weather forecasts diverged overnight with the American model trending colder while the EU model trended warmer. Forecasts still project unseasonable cold over the next 2 weeks.
Total demand continues to push higher amid the coldest weather so far this winter. Demand is up 5.4 BCF/day this morning with the majority of the increase due to a 4 BCF/day rise in heating demand. Power burn is up 1 BCF/day while LNG feedgas demand is down 0.2 BCF/day at 15.1 BCF/day.

Output this morning has fallen to 8 week lows this morning of 98.7 BCF/day. The reduction is stemming from freeze offs which are likely to increase in the coming days.
Technical Analysis

The February 25 natural gas contract gapped higher by .200 on Monday’s open but failed to clear 10 day moving average resistance.
The February contract closed Monday’s session at 3.672, up .318 (9.5%) but settled just under 10 day moving average resistance at 3.680.
With resistance holding, the February contract is currently trading .127 lower at 3.547.
With 10 day moving average resistance holding on Monday, the near term trend is down with the bottom of the gap created on Monday’s open at 3.380 being near term support followed by the 40 day moving average at 3.295.
10 day moving average resistance is at 3.660 today followed by 4.000. Longer term resistance is last week’s 4.201 high.
Moving Average Alignment – Bullish
Long Term Trend Following Index – Bullish
Short Term Trend Follow Following Index - Bearish
Relative Strength Index - 51.81






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