Spot month gas prices have sunk lower since Friday as the market looked past the current arctic cold blast to a warmer weather pattern expected to take hold next week. The change to warmer weather should result in much lower demand and higher output later this month. Falling LNG flows have added further downside pressure. The Feb contract fell 41.3 cents lower from Friday, settling yesterday at 2.90.
The current cold pattern will continue through this weekend before giving way to much warmer conditions at the start of next week. Above normal temps will be widespread with much and strong above normal readings dominating the Eastern US mid to late in the 6-10 day period. The 6-10 day timeframe, Jan 22-Jan 26 will rank 3rd lowest for HDDs.
Temps will turn even warmer across the Eastern half of the US during the 11-15 day period which takes us thru Jan 31. Much to strong above normal readings will favor the West, Midwest and East while the South averages above normal.
A larger than normal draw of 159 is expected for the week ended Jan 12. The estimate compares to last year’s pull of just 68 BCF and the 5 yr avg draw of 126 BCF.
Freeze offs and surging demand this week are expected to produce a withdrawal of 380 BCF for the week ending Jan 19.The current cold blast has hampered production levels by about 10 BCF/day from last week. Steep cuts due to freeze offs left output at 91 BCF/day on Tuesday. The Permian was hit hardest, falling to just 15.5 BCF/day.
The February 24 contract has lost .413 (12.5%) over the past two days including a .206 (6.6%) loss on Tuesday as it closed the session at 2.900.
Two important areas of support were broken on Tuesday. The first was the 10 day moving average at 3.015 followed by trend line support beginning at the mid-April 2023 low at the 2.920-2.930 level.
This turns the 40 day moving average currently at 2.720 followed by the 200 day average at 2.655 into the next areas of support.
A drop under the 200 day average would be a very bearish technical signal as the market heads into the February-March time frame. Over the past 8 years, a post-winter low has been set in either February or March.
Former support at 2.920-2.930 is the 1st area of resistance today followed by the 10 day average at 3.015.
Moving Average Alignment – Neutral-Bullish
Long Term Trend Following Index – Bullish
Short Term Trend Following Index – Bullish
Relative Strength Index – 48.38
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