Prices spiked higher Tuesday afternoon in reaction to reports of a rupture on part of the NGTL nat gas system in Alberta. The affected portion of the pipeline was shut down with the rest of the system operating normally. The incident prompted the front month to surge as high as $1.802. Those gains quickly dried up as total supply appears to be unaffected according to early estimates. Prior to the afternoon rally, mild weather and muted LNG feedgas demand weighed on the market throughout much of yesterday’s session. May futures settled 4.1 cents higher at $1.732.
This week’s storage report is expected to show a 44 BCF injection for the week ended Apr 12 which would be lower than both last year’s build of 61 BCF and the 5 yr avg build of 61 BCF. If correct, the 5 yr avg surplus would narrow slightly to 616 BCF while the year over year surplus would contract to 418 BCF. Total demand last week fell by 6.9 BCF/day versus the week prior while available supply declined by 1.3 BCF/day.
Given even lower demand this week, estimates suggest an injection of more than 80 BCF. This would be higher than both last year’s build of 77 BCF and the 5 yr avg build of 59 BCF.
Weather patterns will see some variation over the next 2 weeks causing a temporary spike in demand. Cooler weather is set to make its way back into the Central US this weekend before spreading into the East throughout next week. Below normal temps are expected to extend from Texas to the Ohio Valley and Mid-Atlantic early in the 6-10 day period before a warming trend occurs across the South and western US. A warmer pattern emerges during the 11-15 day period with above normal temps dominating much of the East.
The market continues its downtrend this morning as given ongoing operational issues and maintenance at LNG facilities. Platts is showing an uptick in feedgas demand this morning of 1.2 BCF/day to 10.3 BCF/day.
Production has remained below 100 BCF/day over the past 4 days. As of this morning, production is estimated at 99.9 BCF/day, up 0.7 BCF/day from Tuesday. Near term forecasts could however help limit price declines.
The spot May 24 natural gas contract traded down to a 1.649 morning low on Tuesday closing most of the open gap created during expiration of the April 24 contract in late-March.
Once the gap was closed, a huge influx of buying came into the market rallying the May contract up to a 1.802 high over the next 15 minutes of trade.
But the rally failed to hold as prices pulled back into the close with the May contract finishing the session at 1.732, up .041.
Daily settle back under 10 and 40 day moving average resistance on Tuesday keeps the market in a sideways to lower trend.
Tuesday’s 1.649 low extending down to 1.630 is near term support followed by the 1.481 and 1.511 weekly lows set in February and March.
40 day moving average resistance is at 1.760 today followed closely by the 10 day average at 1.780.
Moving Average Alignment – Neutral-Bearish
Long Term Trend Following Index – Bullish
Short Term Trend Follow Following Index - Bearish
Relative Strength Index -42.50
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