The new spot month March contract eked out a small gain Tuesday even as weather models trended warmer overnight. The increase was said to be due to seasonal buying and the possibility of colder conditions come late February. March futures settled 2.3 cents higher yesterday at $2.077.
This week’s storage report for the week ended Jan 26 is expected to show a closer to normal withdrawal as temps began to warm, leaving less reliance on storage. Heating demand dropped last week by about 24 BCF/day while production began to recover from freeze offs. This resulted in a much looser supply/demand balance. Platts is calling for a draw of 200 BCF while Reuters calls for a draw of 180 BCF. Stocks last year withdrew by 141 BCF while the 5 yr avg pull is 185 BCF.
The current bearish weather pattern is expected to result in record low HDDs for the first half of February. Maxar’s forecast yesterday shed 20.1 HDDs to a total of 342.5 HDDs, a record low for the period. This season to date currently ranks 3rd warmest per HDD measures. Platts estimates demand will average 121.1 BCF/day over the next week and 121.4 BCF/day during the 8-14 day period.
A massive .360+ gap was created on the daily continuation chart Tuesday following expiration of the February 24 contract on Monday as the March contract was trading in the lower-2.000 level.
After closing Tuesday’s session at 2.077, the March contract is currently trading .060 high at 2.137 in today’s early trade.
The trend remains sideways to down although bullish divergences have formed on the 60-minute charts. The daily charts may also be forming bullish divergences which are new price lows or highs and are not confirmed by the trend following indicators.
The mid-December 2.235 low is near term resistance followed by the top of the open gap created on Tuesday at 2.410.
Weekly low support is at 2.037 followed by the March 2023 low at 1.944.
Seasonally, a post-winter low has been set during February or March 7 out of the past 8 years. The low price point for the year was also set during the seven years when the market bottomed in February or March.
Moving Average Alignment – Bearish
Long Term Trend Following Index – Bullish
Short Term Trend Following Index – Bearish
Relative Strength Index – 35.16
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