Natural Gas Goes Below $2 As Expiration Approaches
Today’s Spotlight Market
U.S. consumers should see some relief in their heating bills this winter season according to government forecasters. In its short-term energy and winter fuels outlook, the U.S. Energy Information Administration (EIA) is projecting that households using Natural Gas for heating will see their winter heating bills down about 10% on average compared to last year, due to lower cost of fuel and expected lower heating demand compared to the severe winter seen in the eastern half of the U.S. last year. For those households using Propane or Heating Oil the expected savings are more substantial with the EIA forecasting an average decrease in home heating bills by 18 and 25 % respectively.
Fundamentals
Natural Gas traders in the U.S. usually consider November 1 as the ?official? start to the winter heating season where we normally start to see Gas draws from storage as cold weather approaches. However, the winter of 2015-16 could shape up as ?disappointing? for those bullish on Natural Gas as ample inventories combined with the potential for a warmer than average winter for a large part of the U.S. has kept price levels near 3 year lows for the lead month futures. In fact, the soon to expire November contract briefly traded below 2.000 on Tuesday as long liquidation selling ahead of the contract expiration this afternoon triggered sell-stops resting just below psychological support at 2.000. Prices quickly rebounded from multi-year lows as buyers began to emerge once the $2 handle was breached. Natural Gas storage levels are running nearly 13% above last year?s levels and are 4.5% above the 5-year average for this time of year. Weather forecasts are calling for normal to above normal temperatures for the most of the country with the Climate Prediction Center in its 8-14 day outlook expecting above normal temperatures from the Great Plains through the East Coast into the second week of November. If accurate, we could see Gas storage builds continue through at least the middle of November, which could help to pressure prices of the December futures which expire at the end of November.? ?
Technical Notes? -? View Today’s Chart
Looking at the daily chart for December Natural Gas, we notice prices trying to stage a recovery from contract lows on Tuesday, following the sharp declines seen in the soon to expire November futures. Prices are well below both the 20 and 200-day moving averages and prices have left a rare chart gap from Friday?s close and Monday?s opening this week. The 14-day RSI has moved well into oversold levels with a current reading of 22.15. Chart support is seen at 2.250 with resistance not seen until the recent high of October 15 at 2.780.
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