Natural Gas Bulls Warming To Warm Weather Forecast
Today’s Spotlight Market
Thursday is always a popular day for Natural Gas traders as the Energy Information Administration releases its weekly Gas storage report. Traders are looking for a 77 billion cubic feet (bcf) injection into storage last week. If accurate, it would surpass last year?s 65 bcf increase, and be nearly 20 bcf above the 5-year average. While current storage levels remain nearly 16% below the 5-year average at nearly 2.6 trillion cubic feet, moderate temperatures this summer have allowed inventories to replenish following the brutal winter experienced this past season.
Fundamentals? – ? Better late than never for warm summer temperatures to blanket the central and eastern parts of the U.S. just as the unofficial start of the fall season arrives as the Labor Day holiday approaches. Price forecasters are calling for above normal temperatures stretching from the Southern Plains through the Atlantic coast in the next 2 weeks, which should lead to increased cooling demand for a large portion of the country. This raises the prospects for increased Natural Gas usage for electricity generation. Cash market traders note increased trading activity as physical buyers are attempting lock-in supplies in anticipation of increased short-term demand for Natural Gas.
As the month of September approaches, we should note that this is historically the peak month for Hurricane activity in the Gulf of Mexico and a major storm threat could halt production. While the Gulf of Mexico only accounts for about 7% of U.S. Gas production, as the bulk of production has turned inland due to the huge production coming from shale formations, any extended outage would be bullish for futures prices. We may be seeing traders start to ?price in? some minor risk premium as front month futures are seeing the price discount to the more deferred months start to narrow as any storm related damage would normally be more supportive for front month contracts. ?
Technical Notes? -? View Today’s Chart
Looking at the daily chart for October Natural Gas, we notice the market is trading near the upper band of the current 30-cent wide consolidation pattern, although the market continues to struggle to hold above the 4.000 level. While prices are currently holding above the 20-day moving average (MA), prices still have some work ahead of them to reach the longer-term 200-day MA, which is currently near the 4.300 price area. The recent high of 4.041 is seen as near-term resistance for the October future, with support found at the July 28th low of 3.740.????
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