Natural gas prices to stay at lows
2023.01.12 15:32
Natural gas prices to stay at lows
By Kristina Sobol
Budrigannews.com – Despite the fact that the United States government reported a rare weekly storage build for heating fuel inventories, natural gas futures on the Henry Hub of the New York Mercantile Exchange remained above the crucial support level of $3 on Thursday.
After the Energy Information Administration announced an 11-bcf, or billion cubic feet, storage build for the week ending Jan. 6, the front-month gas contract on the hub settled up about 2 cents at $3.69 per mmBtu. It climbed to a session high of $3.94 after gaining as much as 27 cents, or 7.4%.
Some industry analysts had predicted a build of less than 10 bcf for the week before the increase in gas inventories, which occurred during what was being called the warmest start to a winter in 20 years. Reuters polled 14 analysts and found that the average draw for the previous week was 13 bcf.
Thursday’s intraday low for February gas was just $3.61, which was higher than Wednesday’s trough of $3.42, which was the lowest it had been since June 2021.
Some participants in the market had anticipated that the front-month gas contract’s last traces of $3 support would disappear this week in response to Thursday’s extremely bearish storage report, bringing back $2 trading levels not seen since May 2021. That development would not have been unexpected after a four-week price drop of nearly 50% that brought the front month below $3.50 from the August peak of above $7.
However, the oversold market may reverse itself, as indicated by some technical chartists who follow natural gas. This is what happened when the most recent storage report was released.
John Kilduff, a founding partner at the energy hedge fund Again Capital in New York, stated, “The storage build we saw today, as rare as it may be for a winter season in gas, had been baked into the cake after the 50% price collapse over the past four weeks.” So, we’re sticking with $3 for the time being, but if it gets a little colder next week, we could go a little higher to make up for some of our recent losses.
Natural gas futures collapsed abruptly last month following explosive upward price action for the majority of 2022 from weather extremes and a supply squeeze caused by political and other disruptions to Russian gas output following the invasion of Ukraine. The unseasonably warm winter temperatures that have left both the European and American heating markets with enough supply have been cited as the primary cause of the shift.
Since the Freeport liquefaction facility in Texas was shut down in June, exports of LNG—also known as liquefied natural gas—have also decreased, with approximately 2 billion cubic feet of gas being idled each day. That has nothing to do with how the weather is going.
Weather forecasters say that, with the exception of a brief period of cold weather for the Southeast this weekend, overall mild temperatures won’t appear to change until at least January 22.
This indicates that longer-range weather models anticipate a return to the bitterly cold Arctic winds that are typical for this time of year in another ten days. Once in place, the country’s central and eastern regions may continue to experience winter weather well into February.
According to Sunil Kumar Dixit, chief technical strategist at SKCharting.com, a number of support points appear to keep the market above $3 based on current gas chart patterns.
The chartist adds:
From a technical point of view, the likelihood of a $2 price is quite low at this time. If we take another leg lower from Wednesday’s low of $3.42, I only see the current bearish streak extending to the 100-Month Simple Moving Average of $3.29.”
“Also, the weekly chart suggests a possible bullish double bottom formation, which, of course, will require confirmation from price action reversal,”
“We will receive confirmation if gas recovers from those support areas and sustains a break above $3.77, followed by $4.17. The rebound targets at that point will be $4.77 and $5.67.
More PJM check power supply for damage during storm in U. S.
