Gas prices fell sharply Thursday with the Dec contract closing down nearly 7%. Storage levels rising more than expected for a 4th straight week helped solidify the downside with losses accelerating midday as American weather models cut 10 HDDs, mitigating the cooler trend that had been supportive early in the week. Dec NG settled 19.8 cents lower at $2.785.
The EIA reported an injection of 42 BCF for the week ended Nov 8, lifting stocks to 3.974 TCF. The build was in line with estimates and outpaced both last year and the 5 yr avg comparisons as warmer than normal temps last week left heating demand minimal across the Midwest and East. 228 BCF above 5 yr avg.
Given recent lower output and cooler temps, it is likely that storage may not reach the 4 TCF level that some had predicted. Estimates for next week’s report range from a withdrawal of 9 BCF to an injection of about 20 BCF.
Production levels declined to 98.7 BCF/day on Nov 9 but have been steadily recovering since. Output for today is estimated at 102.2 BCF/day, up 0.7 BCF/day. Output is projected to remain near this level over the next 2 weeks.
LNG feedgas demand has held steady this week at about 14 BCF/day.
Disagreement among weather models for late November conditions is likely to cause price volatility. The NWS is currently calling for below normal readings across the South Central, Southeast, Midwest and the southern portion of the East Coast Nov 22-28. Maxar however is showing normal to above normal conditions across these regions during Nov 25-29.
Uncertainty remains over Tropical Storm Sara with chances easing this morning that it will reach hurricane strength while tracking into the GOM towards Florida.
Prices are currently trading lower as storage remains robust ahead of withdrawal season.
What started as a drop in prices due to a slightly higher injection number, turned into a full fledge technical breakdown in Thursday’s trade. The December contract settled at $2.785, down .198 cents. After failing to take out Wednesday’s high at $3.020 and holding resistance at the 40-day moving average at $2.980, sellers started the slide mid-morning.
This is the 2nd time prompt month futures have tested the $3.000 level before falling back down. There is little support until the November 8th low at $2.643. If that level is broken, trendline support from the August and October lows comes in at $2.480.
Resistance is right at yesterday’s close and the 10-day moving average at $2.790.
This morning’s continuation of the sell-off has filled a gap between $2.748 - $2.769 that was set from last Friday’s close to this Monday’s close. Volume was still above average at 210,000 contracts.
Moving Average Alignment – Bearish
Long Term Trend Following Index – Bullish
Short Term Trend Follow Following Index - Bullish
Relative Strength Index - 54.70
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