The nat gas market recorded another strong day Thursday as forecasters maintained their outlook for much colder weather over the next few weeks. Prices fell briefly following an extremely bearish storage report however those losses faded quickly. The Feb contract settled Thursday’s trade up 15.3 cents at $2.821.
The EIA reported an exceptionally smaller than normal withdrawal for the week ended Dec 29 as modest demand limited the need to pull from storage. Stocks fell by only 14 BCF last week versus estimates for a 40 BCF pull, leaving total supply at 3.476 TCF. The 5 yr avg surplus widened to 399 BCF while the year over year surplus grew to 553 BCF. The bearish draw included a surprise 14 BCF injection in the South Central region. The next 3 storage reports are expected to come in very strong as conditions turn much colder.
Demand levels this week have been climbing as colder weather has arrived in major consuming regions. Res/comm usage is up 9.9 BCF/day week over week while gas fired power demand is up about 2.7 BCF/day from last week. As a result, withdrawal estimates for the week ending Jan 5 currently range from 116 BCF to 137 BCF. This compares to an 11 BCF injection last year.
We are also seeing a rebound in LNG feedgas demand after falling to 14.2 BCF/day on Wednesday. Feedgas demand is coming in this morning at 15 BCF/day.
The spot February 24 natural gas contract has gained .253 (9.9%) over the past two sessions including a .152 (5.7%) gain on Thursday as it closed the day at 2.821.
Roughly half the past two day’s gains have been erased in today’s early trade as the February has been heavily sold in the overnight session.
Yesterday’s rally reached a 2.863 high holding just under primary resistance at the 2.930-2.940 level which includes the 50% retracement resistance of the October-December downtrend as well as former trend line support broken in early-December on the daily continuation chart.
While prices are down today, the near term trend remains sideways to higher with 2.930-2.940 remaining primary resistance. This resistance should eventually be retested in upcoming trade. If it holds, the trend should turn back lower toward typical post-winter seasonal weakness.
10 and 200 day moving average support is at 2.615-2.620 today and should a strong support area if reached.
Longer term, weakness into the February-March time frame is expected as the market sets a post-winter seasonal low.
Moving Average Alignment – Neutral-Bullish
Long Term Trend Following Index – Bearish
Short Term Trend Following Index – Bullish
Relative Strength Index – 52.79
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