Spot month prices soared 7% to 10 week highs prior to the long weekend as an arctic blast was set to make its way across the country. The Feb contract settled Friday’s trade up 21.6 cents at $3.313. For the week, prices gained 15% on expectations for soaring demand and the likelihood of production freeze offs.
A shift in weather models over the weekend has resulted in a major sell off that began during yesterday’s trade.
Res comm usage has surged higher by nearly 30 BCF/day over the past week. Heating demand on Monday was estimated at 72.2 BCF and is down slightly this morning at 70.8 BCF/day. This caused total demand to surge to 174.5 BCF today, down 1.3 BCF from yesterday’s 175.8 BCF/day.
Demand will remain strong this week as arctic cold continues to impact much of the US. Heating needs are estimated by Platts to fall back into the mid 30 BCF/day range during the 8-14 day period as temps rise back to above normal levels.
Output has been declining since the weekend as temperatures have plunged, resulting in freeze offs and voluntary curtailments. Dry output is estimated today at 92.2 BCF, the lowest level in quite some time.
Output is expected to remain below the 100 BCF/day level over the next week before rising back to an average of 101.5 BCF/day during the 8-14 day period.
The February 24 natural gas contract gapped lower by .220 from Friday’s close opening Monday at 3.111 during the MLK holiday-shortened session.
After closing Monday at 3.106, down .225 or 6.8%, the February contract has continued lower in today’s session testing 10 day moving average support at 3.015.
If 10 day moving average support is broken, former trend line resistance now support which held during three sessions last week will become the next area of support at 2.925-2.930.
If 2.925-2.930 support is broken, the 40 day moving average currently at 2.725 extending down to 2.650 (trendline support beginning at the mid-December 2.235 low) will become the next areas of support.
Last Friday’s rally higher stalled at 3.375 holding under 3.392 weekly high resistance possibly forming a double top reversal.
Moving Average Alignment – Bullish
Long Term Trend Following Index – Bullish
Short Term Trend Following Index – Bullish
Relative Strength Index – 55.23
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