Issues at Freeport and expectations for a further swelling of the surplus triggered a selloff in the May contract on Wednesday. Reports of a slowdown in operations at Freeport sparked concern over more available supply, sending the spot month down 10 cents in early trade. Losses deepened in the afternoon, leaving May NG down 15.9 cents to settle at 1.653. The June contract slipped 11.5 cents to settle at $1.979. With June NG still trading well above May, the question is will it hold value or sell back down once it becomes front month on Monday.
Storage injections last week likely rose as mild conditions resulted in little weather driven demand while LNG feedgas deliveries also declined. For the week, total demand fell 4.7 BCF/day. Estimates call for a larger than normal injection of 82 BCF, which compares to last year’s build of 77 BCF and the 5 yr avg build of 59 BCF.
Colder weather this week has boosted heating needs back above 20 BCF/day, up from the previous 7 day avg of 15 BCF/day. Tighter market conditions are expected to result in a more bullish report for the week in progress with estimates currently near 45 BCF.
Freeport’s Train 3 tripped offline Tuesday due to an issue with its main heat exchange which led to flaring. The event lasted until midday Wednesday. Freeport was estimated to be at 17% of capacity yesterday. Total feedgas demand came in at 11.9 BCF for Apr 24. This morning’s estimate shows a further decline in total feedgas deliveries to 11.3 BCF/day.
Adding to the downside, Maxar’s 30 day outlook underwent significant warm changes from the Rockies to the East. Widespread above normal temps are projected from the Rockies to the East with the Central US seeing the warmest readings relative to normal. A total of 140 CDDs are expected, the 9th highest, while 110 HDDs are expected, ranking 3rd lowest. Maxar's June forecast points to above normal temps across the Plains, Midwest and South with near normal readings in the West and NE.
Prices are extending the downside this morning ahead of a what should be a bearish storage report.
Tomorrow’s expiring May 24 natural gas contract was heavily sold in Wednesday’s session losing .154 (8.8%) to close the day at 1.654, a 1-month low.
The gap created last month during expiration of the April 24 contract was completely closed on Wednesday turning weekly lows at 1.481 and 1.511 into the next areas of support.
The 1.481 and 1.511 lows were set during the past two monthly expirations. Volatility may increase further following today’s weekly storage report and tomorrow’s expiration.
The 10 day moving average at 1.730 and the 40 day moving average at 1.765 are primary resistance today. 10, 40 and 200 day moving average alignment is now bearish along with the short term trend following index.
Moving Average Alignment – Bearish
Long Term Trend Following Index – Bullish
Short Term Trend Follow Following Index - Bearish
Relative Strength Index - 41.29
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