Written Commentary
by market analysts Stephen Platt and Mike McElroy
Price Overview
Prices broke out to the upside yesterday as the November contract blew through resistance to end the session with a gain of over 20 cents at 3.166. The strength followed through today as another 17.2 cents was tacked on with a settlement at 3.338. Yesterday’s storage report got the ball rolling, as the 86 bcf injection was below estimates near 92 and brought the surplus to the 5-year average down to 5.3 percent. Although not an overly bullish number, it surprised the market and flushed out buying immediately after the release that triggered stops in the 3.08 to 3.10 range. The ensuing spike saw a 16 cent gain with volume of over 30 thousand contracts in 30 minutes. The markets determined move higher has been heavily based on technicals, with fundamentals overall tending to the bullish side as well. Weather demand has trended higher into the second half of the week, albeit still below average, while production remains under its recent highs. Trade also appears to be banking on increased exports, which have shown signs of materializing with flows above 13 bcf the last two days. The rally has quickly tested the 200-day moving average which comes in at 3.325, with today’s settlement above there and close on the highs suggesting a near term test of the 3.50 level. A change in sentiment will find minor support near 3.20 but nothing substantial until 3 dollars.
Weakness in the backwardation foreshadowed the recent decline, and if strength returns it might signal a firmer tone in the near term as concerns over stock declines reassert themselves. In addition, a recovery in the gasoline crack will need to materialize to encourage refinery throughput and provide support on ideas that disappearance might not be as bad as currently thought with the December gasoline crack below 10.00 and the lowest since 2020.
Natural Gas
Prices broke out to the upside yesterday as the November contract blew through resistance to end the session with a gain of over 20 cents at 3.166. The strength followed through today as another 17.2 cents was tacked on with a settlement at 3.338. Yesterday’s storage report got the ball rolling, as the 86 bcf injection was below estimates near 92 and brought the surplus to the 5-year average down to 5.3 percent. Although not an overly bullish number, it surprised the market and flushed out buying immediately after the release that triggered stops in the 3.08 to 3.10 range. The ensuing spike saw a 16 cent gain with volume of over 30 thousand contracts in 30 minutes. The markets determined move higher has been heavily based on technicals, with fundamentals overall tending to the bullish side as well. Weather demand has trended higher into the second half of the week, albeit still below average, while production remains under its recent highs. Trade also appears to be banking on increased exports, which have shown signs of materializing with flows above 13 bcf the last two days. The rally has quickly tested the 200-day moving average which comes in at 3.325, with today’s settlement above there and close on the highs suggesting a near term test of the 3.50 level. A change in sentiment will find minor support near 3.20 but nothing substantial until 3 dollars. |
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