Morning Futures Roundup

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Who Say’s Gas is Not Cheap?
 Fundamentals

Not gasoline prices, unfortunately, but Natural Gas prices have tumbled once again, falling to levels not seen since September of 2009 for the front month futures, as traders were "disappointed" at the meager 11 billion cubic feet (bcf) draw from storage last week. Pre-report estimates were looking for a draw closer to 28 bcf, so the wide miss from the estimates was met with heavy selling pressure. With the official start of Spring right around the corner and weather forecasts calling for continued mild weather, traders are now looking at the possibility that Gas may be put into storage as soon as this week!

North American Gas producers are starting to increase operations again, after rig counts were cut last year given the weak economic climate. According to Baker Hughes, the Natural Gas rig count increased to 927 last week, or nearly 22% higher than at the end of 2009. Although there appears to be some support if front-month gas reaches the four dollar level, it will take either increased industrial demand and or a reduction in production to put an end to this historic bear market -- and without a major bullish catalyst, Natural Gas prices may become range bound, which is a far cry from the volatile trading markets seen the past several years.




Technical Notes

Looking at the daily chart for May Natural Gas, we notice prices accelerated to the downside once psychological support at 5.000 was taken out. The move downward has been so swift that that the 4.000 level is now in bearish traders’ sights.



CLICK HERE FOR THE FULL-SIZED CHART

The 14-day RSI has moved into oversold territory with a current reading of 21.63. This may set-up rounds of short-covering buying -- especially if prices fail to close below the key support level at 4.000. Resistance is now found at the 20-day moving average, which is currently near the 4.660 level.


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