James Hyerczyk
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Natural Gas

Natural gas futures are trading sharply higher late in the session on Tuesday after crossing to the strong side of a key technical resistance zone.  This area is now new support with the charts indicating no major resistance until the November 30 main top at $2.977.

At 18:52 GMT, February natural gas futures are trading $2.773, up $0.084 or +3.12%.

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The market had been rangebound for about a week as traders monitored offsetting weather forecasts. Although speculators seemed to be leaning to the upside, there was very little price action until Tuesday’s upside breakout.

Traders should also note that throughout December the market had been supported by strong liquefied natural gas (LNG), but this surge is taking place at a time when LNG levels are weakening. This suggests something bullish is going on with the weather.

NatGasWeather said its estimates for LNG feed gas demand fell over the weekend to around 10.2-10.5 Bcf/d, off around 1 Bcf/d from recent highs. Natural Gas Intelligence data showed volumes hovering around 10.5 Bcf/d Monday.

Generally speaking about the weather, NatGasWeather said that while major models swayed back and forth between milder and colder trends over the weekend and into Monday, the American Global Forecast System ultimately settled on a colder outlook beginning around the Christmas holiday and continuing into early January.

“There’s still light demand to trudge through the next three days, but after the pattern is much better than it’s been all winter and likely finally cold enough for a bullish lean,” the firm said.

EIA Storage Data to be Delivered a Day Earlier

This week’s Energy Information Administration (EIA) weekly storage report will be released on Wednesday due to Christmas Eve landing on Thursday. The report will cover the week-ended December 18.

NatGasWeather said the pull may far exceed the five-year average withdrawal of 127 Bcf for the comparable week.

Daily February Natural Gas

Short-Term Outlook

The main trend is up according to the daily swing chart. A trade through $2.977 will reaffirm the uptrend, while a move through $2.393 will change the main trend to down.

The main range is $2.977 to $2.393. Its 50% to 61.8% retracement zone at $2.685 to $2.754 is controlling the near-term direction of the market.

After straddling the lower or 50% level at $2.685 for seven session, the market finally built up enough momentum to breakout to the bullish side of the upper or Fibonacci level at $2.754. If this market is going to strengthen then $2.754 to $2.685 must hold as support.

For a look at all of today’s economic events, check out our economic calendar.
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