Colder weather forecasts for the eastern half of the U.S. finally took hold today in the natural gas market as it reversed back higher from a 31-month price low reached late last week.
The rally stalled below 2.750-2.800 resistance basis the March 15 contract which has capped all rally attempts for the past two weeks.
Temperatures for the eastern half of the U.S. have turned colder particularly for the southeastern part of the country which could increase weather-related heating demand for natural gas.
Weather demand for natural gas is going to have to pick up over the next 8 weeks into the end of the withdrawal season to break the market out of its current funk. Today's rally could be the beginning of seasonal trend back higher but overall fundamentals with record high storage and current storage well above last year's level remain somewhat negative.
Key to today's strength will be whether or not the market can continue higher over the next few sessions after topping out at a spot price high just under 2.750 today.
As mentioned earlier, 2.750-2.800 will be an important level to watch basis the March 15 contract. This area held as support throughout the month of January, it now becomes a primary resistance level holding last week at a 2.788 high and again today.
A breakout above 2.800 would likely bring in both short-covering and new fund buying possibly indicating a market low has been set.
But if the rally stalls under 2.750-2.800 as it has now twice over the past two weeks, it would be a very bearish technical signal likely leading to an ensuing price break back to a new multi-year low.
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