Gas prices extended Monday’s gains into yesterday’s session, supported by expectations for stronger power burn as temps rise during the 8-14 day period. Ongoing strength in LNG feedgas flows is also providing underlying support for demand. A low pressure system moving across Florida into the Gulf has a 40% chance of development over the coming days and could dampen some of the expected increase in consumption. Aug futures settled 5.7 cents higher at $3.52
Despite some tightening in the supply/demand balance last week, tomorrow’s storage report is still expected to show a larger than normal build for the week ended July 11. Estimates call for a build of 46 BCF, which compares to last year’s build of 18 BCF and the 5 yr avg build of 41 BCF. Increased power burn and rising LNG flows boosted demand while production levels slipped. Models are projecting an injection of 42 BCF for the week in progress which would be 12 BCF higher than the 5 yr avg and 20 BCF higher than last year.
Projections for heat to build later this month is supporting further gains this morning with the spot month up about 4 cents. The NWS shows elevated chances for widespread, above normal readings across much of the US while the Weather Desk outlook is not quite as bullish.
Power burn is estimated this morning at 48.4 BCF/day and is expected to climb to an average of 50 BCF/day during the 8-14 day period.
Plaquemines has come online at a rapid since starting up in December. The plant has accounted for 17% of feedgas demand so far this month. Venture Global is planning to add an additional 16 liquefaction blocks at Plaquemines instead of the 12 blocks originally proposed in March. The changes would increase production capacity of the project to 24.8 mmt/year.
Technical Analysis
The August 25 natural gas contract has broken out above 10, 40, and 200 day moving average resistance in this week’s trade turning the near term trend back higher following three weeks of selling.
The August contract broke out above the 40 day average at 3.500 in Tuesday’s session closing the day at 3.523, up .057.
The 38% retracement of the June-July downtrend has been reached at 3.530 turning the 50% retracement at 3.650 into the next upside resistance.
Decreasing volume over the past week indicates current strength has been primarily short-covering rather than aggressive new buying.
Longer term, current strength is considered an upside correction of the June-July downtrend, once it ends, renewed selling is expected.
Moving average resistance broken this week on the daily continuation chart now becomes downside support. The 10, 40 and 200 day moving averages have converged between 3.400-3.500 and are primary support.
If moving average support is broken, last week’s 3.149 low will become the next area of support.
Moving Average Alignment – Neutral-Bullish
Long Term Trend Following Index – Bearish
Short Term Trend Follow Following Index - Bullish
Relative Strength Index - 52.66
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