Volatility came back into the natural gas market today with a vengeance as the bulls again were caught by surprise by a larger than expected EIA weekly storage build.
Today's 65 Bcf injection came near the upper end of a wide range of pre-report guesses which varied from a low of 48 Bcf to a high of 89. The injection reported today came 11 Bcf above the 54 Bcf average expected ahead of the report prompting another heavy sell off.
The September 15 contract lost .144 or just under 5% in today's session settling back under the 2.800 level.
As mentioned in yesterday's commentary, recent strength was nothing more than a short-squeeze in the market. The strong storage builds which have now surpassed the 5-year average 16 out of the past 19 weeks are all that matter longer term. If storage builds remain high as expected, a record amount of gas will be in storage by year's end surpassing the 2012 peak storage high of 3,929 Bcf.
Production is showing signs of slowing with production declines 5 out of the last 10 weeks. If production does begin to slow, it will be a supportive factor possibly as soon as later this year.
Technically, the market rally failed at the upper trend line resistance of a weekly chart triangle pattern at the lower-2.900 level. A breakout under lower trend line support near 2.700 will trigger the triangle pattern which will have a downside measuring objective for trade down to the lower-2.000 level.
Seasonally, a final price low is expected over the next few months which could end up being a multi-year low for the natural gas market.
No comments:
Post a Comment