Natural gas settled lower for a 6th straight session yesterday amid a drop in consumption due to mild weather and reduced LNG feedgas. Expectations another widening of the storage surplus also weighed on prices. Apr futures closed 5.6 cents lower at $1.658.
The average rate of storage withdrawals this year has been 20% lower than the 5 yr avg. A much lower than normal draw is expected in today’s storage report. The EIA is likely to show a 3 BCF pull from storage for the week ended Mar 8. This compares to last year’s draw of 65 BCF and the 5 yr avg draw of 87 BCF.
Early estimates for next week’s report range from a draw of 11 BCF to an early season build of 9 BCF. Extremely mild temps last week diminished heating demand to levels more typical of late April. Over the next 2 reports, the storage surplus could potentially surge by more than 125 BCF.
More springlike temps this week have suppressed demand even further. Total demand yesterday plunged to 97.4 BCF/day as res/comm usage fell to just just 21.1 BCF/day. Weather driven demand will rise heading into the weekend as colder air settles in. Res/comm usage will average 28.3 BCF/day over the next week before easing slightly to 27.4 BCF/day during the 8-14 day period. Total demand is forecast to average 107.3 BCF/day over the next week before easing slightly to 106.1 BCF/day during the 8-14 day average.
After trading little changed earlier this morning, prices are currently a few cents higher on the day.
The April 24 natural gas contract has closed down six consecutive sessions dropping from a 2.009 high reached Tuesday of last week to a 1.658 settle on Wednesday.
The April contract has broken under the 38%, 50%, and 61.8% retracement support levels of the February-March uptrend on recent weakness turning the 78% retracement at 1.620 and the final 88% retracement at 1.570 into the next areas of support.
If 1.570 support is broken, the 1.511 February low will become the next area of support. If 1.511 or above support can hold, a post-winter low will be in place.
If 1.511 support is broken, the June 2020 low at 1.432 will become the next area of support.
Moving Average Alignment – Bearish
Long Term Trend Following Index – Bullish
Short Term Trend Follow Following Index - Bullish
Relative Strength Index - 37.73
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