Buyers Defended $3.00 but the Trend Has Already Turned
November natural gas futures are finding buyers under $3.00 Wednesday. After Tuesday’s selloff, that counts for something. It doesn’t count for much. The contract took out the last swing bottom on the way down, flipping the main trend to down on the daily swing chart. Today’s bounce hasn’t repaired any of that.
The pipeline scare that drove last week’s rally is gone. What’s left is a small dip in production against a weather forecast that’s pulling demand out of the front month. Neither one is giving buyers a reason to take offers above the support they lost.
At 17:10 GMT, November natural gas futures are trading at $3.005, down $0.006 or -0.27%. The contract traded from $2.966 to $3.058.
Daily November Natural Gas Futures Technical Analysis
November natural gas futures turned lower Tuesday after taking out the $2.976 swing bottom. The main trend is now down according to the daily swing chart. A trade through the main top at $3.395 will change the main trend back to up.
The short-term range is $2.896 to $3.395. Its 50% to 61.8% retracement zone is $3.146 to $3.087. The selloff carried the market through the lower boundary of that zone, turning $3.087 into the first resistance level.
The 50-day moving average at $3.039 is also resistance. November natural gas traded above it during Wednesday’s session but could not hold the move. The session low at $2.966 is only a low at this point. It does not establish a new bottom or change the swing-chart structure.
The first support is the September low at $2.902, followed by the August bottom at $2.896. A sustained move under $2.896 would indicate the selling is gaining momentum.
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See all Natural Gas forecastsThe Weather Has Nothing for November Buyers
Seven days of warm-to-hot weather across the South, and November buyers still can’t find demand in it. NatGasWeather has highs there in the 70s and 80s. Most of the rest of the country sits in the 60s to 80s, comfortable, with a few cooler pockets up in the far North.
That’s the wrong kind of warmth for this contract. Highs in the 80s this late in the season don’t move national demand much. Demand is running low at the worst time for a market that couldn’t even hold the 50-day moving average Wednesday.
The mild pattern is what stopped the pipeline move. An outage plus a short squeeze carried the market last week. What it has this week is a forecast that neither side of the power-burn trade can do much with.
The Leak Repair Took the Squeeze Out of November
The squeeze is over. Columbia Gas Transmission tracked last week’s force majeure to a leak in West Virginia, with repairs expected to wrap up over the weekend. That outage put about 1.8 Bcf per day of transportation capacity at risk. It hit with the market pressing resistance. Shorts had to get out.
The repair outlook killed the urgency. The outage never lasted long enough to shift the broader supply balance. November moved into the prompt position with the premium already bleeding out of it.
Production is the only thing slowing the selling. Day-to-day readings came in subdued, giving buyers a reason to defend the market near $3.00 Wednesday. That was enough to slow the decline without putting the contract back over the 50-day moving average or the broken retracement zone.
I don’t see a supply story here that helps the bulls for long. Lower-48 dry gas production was 110.6 Bcf per day Friday, according to BNEF. That’s slightly under a year ago, however, output is still sitting close to record territory. Nobody is getting squeezed on supply at these levels.
Storage Is Too Comfortable to Bring Back the Rally
LNG is still a big buyer under the market. It just isn’t growing. Estimated net flows to U.S. export terminals were 18.5 Bcf per day Friday, a large pull on domestic supply. That was down 1.6% from the prior week, with nothing showing it’s accelerating.
Thursday’s Energy Information Administration storage report is expected to show a 55 to 65 Bcf injection for the week ended September 25. The last report had a 53 Bcf build, putting working gas at 3,351 Bcf. That left inventories 2.9% above the five-year seasonal average.
Short-covering off a light number is about the best buyers can hope for Thursday. The supply cushion doesn’t go anywhere. The EIA sees end-of-October inventories near 3,985 Bcf, the highest level in a decade and 5% above the five-year average.
What to Watch
Thursday’s storage report is the next thing on the calendar. The weather models are going to matter more. Buyers need a colder forecast or another Appalachian supply problem to get back in, and right now they don’t have either one. Sellers are working with low demand and plenty of gas in storage.
The main trend is down on the daily swing chart, with the bias leaning bearish. Buyers came in under $3.00 and pushed the contract through the 50-day moving average at $3.039 during the session. They couldn’t hold it. At 17:10 GMT, November natural gas was back under it and well short of the broken retracement zone. $3.087 is the level buyers have to take back.
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