

Nat gas prices pushed higher Thursday but once again failed to break through the $3 level. Prices took off after the EIA revealed yet another contraction in the storage surplus due to lighter production and late season cooling demand. Nov futures gained 8.4 cents to settle at $2.97.

The storage surplus narrowed for a 12th straight week as storage levels rose by a smaller than normal 57 BCF in the week ended Sep 27. While bullish compared to historical levels, the build was in line with estimates. Total gas in storage is currently at 3.547 TCF, 190 BCF above the 5 yr avg and 127 BCF above last year. The East and Midwest led with builds of 28 BCF and 20 BCF, respectively, while the South Central region posted a draw of 4 BCF.
Demand this week has eased while production has ticked up slightly. Current projections suggest a build of about 76 BCF for the week ending Oct 4. This compares to last year’s build of 85 BCF and the 5 yr avg build of 96 BCF. The following 2 reports could also come in lower than normal, possibly dropping surpluses below 150 BCF.
Production is still down from summer highs which is moderately supportive. Supply is however expected to recover from recent lows as voluntary production curtailments begin to ease up. If output does not rise as expected, the storage surplus could end up around 50 BCF heading into winter.

The rally has stalled this morning with Nov NG down about 5 to 6 cents. Another attempt to break through resistance is highly likely given expectations for LNG feedgas to rise back up towards 13 BCF/day once seasonal maintenance at Cove Point concludes mid October.
The market is also paying close attention to another disturbance in the Gulf along with geopolitical issues in the Middle East.

For a 4th consecutive day on Thursday the spot November 24 natural gas contract was unable to close above 2.950-3.000 resistance.
This resistance area represents a three point trend line on the daily continuation chart, the 200 day moving average on the November 24 daily chart, and it is the final 88% retracement resistance of the June-July downtrend at 2.990.
A close above 3.000 will turn the June 3.159 high into the next upside resistance.
Daily volume has been declining over the past week and the daily RSI is at 73.76 an area considered “overbought”. This may be a warning of a near term pull back.
Weekly low support is at 2.825 followed closely by the 10 day moving average at 2.795.
Moving Average Alignment – Bullish
Long Term Trend Following Index – Bullish
Short Term Trend Follow Following Index - Bullish
Relative Strength Index - 73.76 (in overbought area)






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