The natural gas market today suffered one of the worst single day losses since last February as prices were falling from their winter highs.
Today's selling was even more pronounced as came near new all-time price lows for many of the forward contracts posted last Thursday which certainly sets a bearish tone for the market as the month of December progresses.
The latest weather forecasts from the National Weather Service are deep-orange meaning above-normal temperature predictions across much of the U.S. into late December.
Bearish weather forecasts and a storage withdrawal last week that came in near the lower end of pre-report expectations have been negative factors for the market.
U.S. dry natural gas production which hit a new all-time daily high on Dec. 2nd of 71.8 Bcf (billion cubic feet) according to Bentek in a recent EIA report only added further fuel to an already bearish outlook for the market.
On at technical note, the spot January 15 contract still hasn't dropped to a new 2014 spot contract low even with today's 5.4% drop. Today's 3.585 low has so far held above the late-October spot contract low of 3.541 low which is about the only potentially bullish signal that can be found in the market at the present time.
Recent selling in the natural gas market could be tied in part to weakness in other markets particularly crude oil in which funds hold a surprisingly large 264,996 contract long position. Forced selling in that market could be spilling over into long natural gas positions.
Looking ahead for natural gas, current storage in nearly 10% below the 5-year average and there are many months ahead for a potential spike in heating demand.
Once weather does turn back colder the market will likely bottom. And as shown in previous posts, once winter rallies do materialize, they are typically fast and furious. This winter should be no different.
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