

The 3 day rally in nat gas came to a halt yesterday. A morning selloff was exacerbated by a surprisingly bearish storage report however underlying supply concerns remain. The ever changing tariff situation added to uncertainty over a trade war. Trump announced a postponement yesterday of US tariffs on imports from Canada and Mexico until April 2. The delay only affects goods covered under the USMCA Agreement. The spot month settled 14.8 cents lower at $4.302.

Last week saw a significant loosening in the supply/demand balance with consumption falling across the res/comm and power generation sectors while production levels rose. A withdrawal of 80 BCF was reported for the week ended Feb 28, 12 BCF lower than the avg estimate. Solar generation was very strong last week, a key factor behind the miss in estimates. Production estimates for the reporting week may have also underestimated actual volumes. Total gas in storage stands at 1.76 TCF, 585 BCF lower than last year and 224 BCF below the 5 yr avg.
For the week ending Mar 7, a smaller draw between 50 and 55 BCF is expected, which would be in line with the 5 yr avg draw of 56 BCF but much higher than last year’s pull of 19 BCF.
The selloff continues this morning as near term forecasts suggest withdrawals could drop off heading into late March given reduced usage. Total consumption for today is estimated at 118.8 BCF/day, 3.7 BCF lower on the day. Over the next 2 weeks, total consumption is seen averaging 114.3 BCF/day due to a 5 BCF/day drop in heating needs. LNG feedgas demand is estimated to avg 15.6 BCF/day during this timeframe.

Technical Analysis

Wednesday’s bearish inside range day reversal posted by the April 25 natural gas contract spilled over into selling on Thursday as the contract lost .148 (3.3%) to close the day at 4.302.
Continued selling today has dropped the April contract to daily continuation chart 10 day moving average support at 4.125.
If 10 day moving average resistance is broken, the 40 day moving average, which held as support on Monday, will become the next support at 3.820. A close under the 40 day average will turn the trend back down.
Tuesday’s 4.551 high remains primary resistance.
A bearish divergence (new price high, lower index high) has appeared on the daily RSI index. Bearish divergences may also be forming on the trend following indexes.
Given bearish index divergences combined with winter rapidly winding down, a winter high may finally be in place.
Moving Average Alignment – Bullish
Long Term Trend Following Index – Bullish
Short Term Trend Follow Following Index - Bullish
Relative Strength Index -55.48






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