Today’s Spotlight Market
Large speculators remain net-short Natural Gas futures, but have slowly reduced their position the past week. According to the most recent Commitment of Traders report, non-commercial traders reduced their net-short position by nearly 3,800 contracts to 177,631 contracts. Commercial traders reduced their net-long position by over 10,000 contracts during the same reporting period. Only non-reportable traders, which are normally small speculators, are trying to pick a bottom for Natural Gas prices, as they added over 6,200 new net-long positions last week for an overall net-long position of over 48,000 contracts.
Fundamentals
Despite storage levels that trail the 5-year average, Natural Gas bulls have not seen any meaningful rally in prices the past few weeks, as moderating temperatures and record production have curtailed price volatility. Last week the Energy Information Administration (EIA) reported that Gas in storage in the U.S. rose to 3.1 trillion cubic feet (tcf), which was a 112 billion cubic foot (bcf) increase from the prior week.
Weather forecasts are now calling for more ?seasonal? temperatures for the rest of October, which should help to temper any major spikes in demand for heating or cooling as we head into the unofficial start of the winter Gas draw on November 1.
One bright spot for bulls is the expected demand increase for Natural Gas from the chemicals industry. The EIA expects the chemical industry to increase is Natural Gas usage by 4% next year to an average of 22.1 bcf per day.? In addition, there are several new chemical plants expected to come online in the next few years, which will only add to the industrial usage totals in the future.
Technical Notes? -? View Today’s Chart
Looking at the daily chart for November Natural Gas, we notice prices trading near the lower end of the current consolidation phase that began back in July. Prices are holding just below the 20-day moving average (MA), but remain well below the long-term 200-day MA, which is currently nearly 30 cents above recent price levels. The 14-day RSI remains in neutral territory, with a current reading of 46.08. Support is seen at the July 28th low of 3.786, with resistance found at 4.204.
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