Warm Start To Winter Keeps Natural Gas Prices In Check
Today’s Spotlight Market
Large speculators remain net-short Natural Gas futures, but appear hesitant to add to existing positions with prices near contract lows. The most recent Commitment of Traders report shows non-commercial traders holding a net-short position of nearly 213,000 contracts as of November 24th. This was a reduction of nearly 5,500 contracts for the week, despite prices falling to new lows. Commercial traders are on the other side of the trade with a net-long position of just over 185,000 contracts. Meanwhile, non-reportable traders continue to try to pick a bottom and have added nearly 2,000 new net-long positions during the reporting week.?? ?
Fundamentals
It appears that winter is going to take its sweet time arriving this year, as weather forecasts are calling for above normal temperatures for most of the U.S. through mid-month. That was music to those short Natural Gas, as the lead-month January futures continue to trade near contract lows. Natural Gas fundamentals were already leaning towards the bear camp, with inventories already over 4 trillion cubic feet, which is up nearly 7% from the 5-year average.?? In addition, the Energy Information Administration reported that U.S. Gas production continues to increase, despite prices near multi-year lows. Now the Climate Prediction Center in its 8 to 14 day outlook has the entire eastern 2/3rds of the U.S. with above to well-above temperatures out to December 15th. If accurate, this will allow either additional Gas to be placed into storage or, at worst, greatly limit the amount of Gas drawn from storage to be used for heating purposes. Natural Gas futures spreads continue to weaken, with the Jan/Mar 2016 spread falling over 8 cents since the end of October, which appears to be signaling that market participants do not see any near-term demand spikes as we approach the official start of winter in the U.S. on December 21st.?? ?
Technical Notes? -? View Today’s Chart
Looking at the daily chart for January Natural Gas futures, we notice prices continuing to hover near contract lows, with prices struggling to hold above 2.300. The 14-day RSI is weak, but is barely holding above oversold levels with a current reading of 30.11. There is strong chart resistance between 2.350 and 2.600, which are the high and low bands of the previous consolidation pattern. Chart support is seen at the November 30th low of 2.175, with major support seen at 2.000.
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