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By: Heather Wine, Senior Risk Manager - Energy
4-Year price deciles
Natural gas prices rose nearly 4% Monday as stock markets pushed higher while concern continued over European supplies as they look to replace Russian gas. Russia is also threatening to cut off supplies to Finland amid talk they could be joining NATO. Further strength stemmed from extreme heat in Texas that pushed power demand to record highs. June futures settled 29.3 cents higher $7.956.
Sunday marked the first of what should be a 6 day run of record setting CDDs in the ERCOT region. A forecast of 95.7 CDDs for ERCOT would outpace the record of 83.9 back in 1996. A cooldown is not expected until the weekend.
The next 2 weeks will see a higher than normal amount of cooling demand with a total of 81.6 CDDs projected. Last year during this time, a total of 72.8 CDDs were observed. CDDs fell 7.3 since Friday with warmer changes made in the West while cooler changes occurred in the East.
Russian gas exports to Europe fell Monday to 7.9 BCF/day from 8.2 BCF/day on Sunday via the 3 main pipelines into Germany. This compares to an average of 11.9 BCF/day in May 2021.Gas stocks in NW Europe are currently running 14% below their 5 yr avg. US gas stocks remain 16% below their 5 yr avg.
Nat gas prices are extending gains this morning, rising another 5% on a preliminary drop in output and record setting cooling demand in Texas.
Reuters is projecting that output will drop today by 1.9 BCF/day to 3 week lows of 93.5 BCF due mostly to declines in PA.
The June 22 natural gas contract started yesterday’s session sharply higher as it topped out at a 8.183 morning high.
The contract sold down to an 7.663 mid-day low, the same price it settled on Friday, before reversing back higher into the close. For the day, the June contract was up .293 (3.8%) settling the session at 7.956.
Early buying today has broken the June contract out above 8.180-8.200 resistance turning the 78% retracement of last week’s sell off at 8.430 into the next area of resistance.
The final 88% retracement at 8.690 is longer term resistance. If 8.690 is reached and broken, 9.000 will become the next target.
Current strength from last week’s 6.430 low could still be an upside correction within a greater downtrend as daily volume from last week’s low continues to decline. But yesterday’s bullish recovery likely points toward higher prices ahead.
Technical Indicators:
Moving Average Alignment – Bullish
Long Term Trend Following Index – Bullish
Short Term Trend Following Index – Bearish
Relative Strength Index - 61.45
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