Natural Gas Prices Choppy on Warmer 10-day Forecast
??? Fundamentals
The recent rally in Natural Gas futures has run into some headwinds despite posting the first withdrawal from storage this season. The Energy Information Administration (“EIA”) reported an 18 billion cubic feet (“bcf”) withdrawal from storage last week, which was in line with analysts’ estimates. However, prices fell after the report was released, as some traders seemed to “sell the facts” after prices already rallied 40 cents since the start of the week.
Despite the draw from storage, U.S. gas inventories appear to be more than ample, currently 5.6% above the 5-year average for this time of year. In addition, the 6 to 10-day weather forecast is calling for above normal temperatures in the central U.S., which is the biggest market for gas heating usage.
Large speculators are still holding a net-short position in Natural Gas futures, with the most recent Commitment of Traders reports showing non-commercial traders net short 61,896 contracts, as of November 6th. This was prior to last week’s steep rally, as exchange data seems to indicate that the rally was mostly short-covering and not new-longs entering the market.
?? Technical Notes
Looking at the daily chart for January Natural Gas, we notice prices valiantly trying to hold above the 20-day moving average. We may have what appears to be a rather large “bull flag” forming on the daily chart. To confirm the chart pattern, we would like to see a strong close, with prices over 4.000, preferably on above average trading volume.
The 14-day RSI is in neutral territory with a current reading of 53.73. 3.945 is seen as the next resistance level for the January Futures, with support found at the November 12th lows of 3.598.
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