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By: Heather Wine, Senior Risk Manager - Energy
Spot month gas prices settled above the $5 level yesterday for the first time in 3 years as bearish storage data for the week ended Nov 28 was overshadowed by expectations for a massive withdrawal for the week in progress. The market traded lower following yesterday’s EIA report which showed a smaller than expected pull of 12 BCF. Those losses failed to hold as the market priced in the possibility of a 190 BCF draw in next week’s report. Jan futures settled 6.8 cents higher at $5.063.
Production has fallen from late November highs near 109 BCF/day but still remains at robust levels. Output this morning is pegged at 107.8 BCF/day, up nearly 4 BCF/day from last year. Some minimal freeze offs have occurred but the risk of widespread freeze offs is low. Production is expected to hold steady over the next week.
Consumption surged yesterday by 12.5 BCF/day to 157.2 BCF/day, with much of the increase stemming from a 7.7 BCF/day rise in heating demand. Estimates this morning peg total consumption down 9.5 BCF/day at 147.7 BCF/day, with heating demand accounting for 6.2 BCF/day of that loss.
As cold pulls back during the 8-14 day period, res/comm usage is projected to decline by 8 BCF/day from today’s level with total demand averaging 133.6 BCF/day.
Source: NOAANat gas is being underpinned this morning by forecasts for more severe cold during the 11-15 day period. The Weather Desk is calling for more intense cold across the Midwest and East while the West averages much warmer than normal.
The spot month is currently trading 29 cents higher.
The January 26 natural gas contract overcame early selling on Thursday to close the day near the session high settling at 5.063, up .068.
The spot contract is on course for a 7th consecutively higher weekly close while also settling above the 5.000 level for the 1st time since December 2022.
Overnight buying has rallied the January contract to the 61.8% retracement of the March-October downtrend at 5.200.
A close above 5.200 will turn the 78% retracement at 5.535 into the next upside objective.
Trend following indicators including daily RSI are in the extreme “overbought” area, but markets can remain overbought or oversold for some time before a correction finally occurs.
5.000 is near term support followed by the 10-day moving average currently at 4.800.
Moving Average Alignment - Bullish
Long Term Trend Following Index – Bullish
Short Term Trend Follow Following Index - Bullish
Relative Strength Index - 74.66 (in overbought area)
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