Natural Gas Sellers Aren’t Waiting for the EIA Number
Sellers aren’t waiting on the storage report. November natural gas futures are back under $3.00 Thursday morning, giving back all of Wednesday’s bounce with the EIA release still to come. Losing that much ground before the number is even out tells you where the conviction is.
At 11:15 GMT, November natural gas futures are trading at $2.957, down $0.069 or -2.28%. The contract traded from $2.948 to $3.016.
Daily November Natural Gas Futures Technical Analysis
November natural gas futures are trading lower early Thursday after failing to hold Wednesday’s recovery. The main trend is down according to the daily swing chart after the market took out the $2.976 swing bottom. A trade through the main top at $3.395 will change the main trend back to up.
The $3.087 to $3.146 retracement zone is now resistance. The 50-day moving average at $3.036 is also above the market.
The session low at $2.948 is only a low at this point. It does not establish a new bottom or change the swing-chart structure. The next support is the September low at $2.902, followed by the August bottom at $2.896.
A recovery through the 50-day moving average could bring in buyers looking for a test of $3.087. A sustained move under $2.896 would show sellers are pressing the new downtrend instead of just taking out the stops under $2.976.
The break under $3.00 is psychological rather than a new swing trigger. The trend changed at $2.976. It still matters because Wednesday’s close above the round number did not bring follow-through. Buyers had a chance to rebuild the contract over $3.00 and the 50-day moving average. Sellers took it back before the EIA report.
The $3.036 to $3.087 area is now a band of overhead resistance. A rebound into it would initially be a counter-trend rally, not proof that the downtrend is over. Buyers have to take offers through the 50-day moving average, hold the move and then deal with the lower boundary of the retracement zone. Above $3.087, the $3.146 level becomes the next test.
Underneath, Thursday’s low at $2.948 is the first price buyers have to defend. A break through it would put the $2.902 to $2.896 support area in front of the market. That area is close enough that sellers do not have much open space to work with. The question is whether buyers step in aggressively there or leave only passive bids under the market.
Natural Gas Price Forecast
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See all Natural Gas forecastsA Warm October Map Is Beating the Storage Estimate
The weather is doing the selling. Warm to hot across the South through October 7, mild just about everywhere else, with California baking in triple digits out on its own. Outside of California, none of it burns much gas. The October 5 to 14 outlook doesn’t have any real cold in it either.
NatGasWeather is calling for a 64 Bcf injection in the Energy Information Administration report for the week ended September 25, well under the five-year average for the week. Buyers took a shot around $3.00 Wednesday when the estimates came in light. The light build is already known, though, and with nothing cold in the seven-day forecast there was no reason to hold it into the release.
Production and Rigs Keep the Sellers Comfortable
Output is growing about twice as fast as demand right now, going by BNEF’s numbers. Drillers just pushed the active U.S. natural gas rig count to a three-year high, according to Baker Hughes. Rigs climbing with the front month back under $3.00 says producers aren’t pulling back.
LNG is still taking a big bite out of supply, though feedgas eased a little from the prior week. Storage is the bigger issue. The EIA has Lower 48 inventories finishing October at their highest level in a decade, comfortably over the five-year average. Winter is going to start with a lot of gas in the ground.
The Columbia Squeeze Is Over
Columbia Gas Transmission’s force majeure in West Virginia gave last week’s rally its legs, with a mechanical issue putting Appalachian transportation capacity at risk. The company found the leak and expected repairs to wrap up over the weekend. The premium came out once that timeline was clear, and there’s no new supply scare on the screen to take its place.
What to Watch
The EIA number is next, and sellers already showed what they think of a light build. After the release it’s back to the weather models, and a colder run is the only thing on the board that makes the short side uncomfortable. The question after Thursday is whether anybody wants to defend under $3.00 without help from the weather.
More Information in our November natural gas futures.
