Bearish Traders Are Warming Up To Natural Gas Futures
?? Fundamentals
Natural Gas futures continue to slide with unseasonably warm temperatures for most of the U.S. in the forecast throughout the rest of 2012. Front month futures prices are at their lowest levels since September, as traders continue to digest a surprising late season storage injection last week.
The Energy Information Administration (EIA) reported in its weekly gas storage report that 2-billion cubic feet (bcf) of gas was placed in storage last week: a rather rare occurrence for the month of December, when increased demand for heating usually results in gas being pulled out of storage.
To highlight the significance of this storage injection, the 5-year average for this time of year is a draw of 113 bcf. Gas storage levels are more than ample going into winter with over 3.8 trillion cubic feet available.
Despite the current relatively low price level for Natural Gas, U.S. gas production is expected to increase in 2013 with the EIA expecting a production gain of 0.5% to 69.59 bcf per day. So unless we see much colder temperatures this coming winter, it may be difficult for Natural Gas prices to post any sustained price rally in the coming months.
?? Technical Notes
Looking at the daily chart for January Natural Gas, we notice prices falling for the second consecutive session and nearing chart support in the 3.200 to 3.250 price area.
The 14-day RSI is approaching oversold conditions, with a current reading of 31.20. Ironically, large speculative traders who are net-short Natural Gas (according to the Commitment of Traders report), were covering short positions the previous week but may have begun to re-establish these short positions as prices traded below the widely watched 200-day moving average (MA). 3.200 is seen s the next major support level for January Nat Gas, with resistance found at the 200-day MA, currently near the 3.514 price level.
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