Natural Gas Prices Tumble On Cool Summer Weather
Today’s Spotlight Market Natural Gas bulls received a bit of a reprieve from the vicious sell-off in prices after the weekly Energy Information Administration (EIA) gas storage report showed a less than expected build in storage last week. Producers added 90 billion cubic feet (bcf) of gas into storage for the week ending July 18, which was below the average forecast of closer to 95 bcf of gas placed in storage. While prices initially rallied following the report, traders should note that the storage build was still nearly double that of last year?s 46 bcf build and more than twice that of the 5-year average of a 43 bcf build.
Fundamentals Natural Gas prices are mired in a bear market trend as cooler than normal temperatures this summer have curtailed gas demand for power production used for cooling. Front month August Natural Gas has fallen to 8 month lows, with prices down by over 40% from 2014 highs as production has greatly outpaced recent demand leading to well above average Gas injections into storage the past several weeks. Long liquidation selling by speculators has aided the sharp price decline, sending prices well below $4 per million British thermal units. Weather forecasters are adding to the bearish tone in the market as the 8 to 14-day forecast is calling for below normal temperatures through the beginning of August, which should keep the demand for air-conditioning subdued. 14 consecutive weeks of above average Gas storage injections will help to alleviate what were tight supplies of Gas in storage coming into the summer, a result of the so called ?polar vortex? that send most of the U.S. into a deep freeze this past winter and sent heating demand soaring. Now it appears that a benevolent Mother Nature is allowing U.S. gas storage levels to be replenished significantly, which will go a long way towards alleviating concerns of inadequate gas supplies in storage going into November, which is the traditional start of the winter heating season.
Technical Notes? -? View Today’s Chart Looking at the daily chart for September Natural Gas, we notice the market trying to forge a near-term bottom near the 3.750 price level. Prices remain well below both the 20 and 200-day moving averages but the 14-day RSI has moved into oversold territory with a current reading of 27.61. With the market currently at oversold levels, we may see a bounce to close the chart gap at 3.938 which is now the next resistance level. Support is found at the recent low of 3.759.
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