The new front month January 16 natural gas contract traded down to a new contract low at 2.175 in today's early trade but was able to rally back higher on the day by the session's close.
The summer 16 natural gas strip (April 16-October 16 contracts) and the winter 16-17 strip (November 16-March 17 contracts) both set new all-time lows last week at 2.417 and 2.750; respectively, but also firmed slightly in today's trade.
There is little supportive news in the market at the present time with near and longer term weather forecasts remaining negative for winter heating demand and storage which has reached a new all-time high of 4,000 Bcf.
There could be the first storage withdrawal of the current winter heating season reported on Thursday which could be a supportive factor for the market. But without sustained winter heating demand to help drawdown record high stocks, rallies should continue to be short-lived.
Dry-gas U.S. production was not released last week by the EIA due to the holiday but was estimated at 70.9 Bcf per day the previous week. Production has fallen from a high of 74.3 Bcf per day reached in December 2014 but is expected to rise next month. The natural gas rig count released on Friday showed the current U.S. rig count at 189, tying an all-time low reached last October.
On the technical front, the 2.000 level remains a strong support level with the 2015 spot contract low of 1.948 being set in late-October. A subsequent sell off last week bottomed out at a 2.051 low before the market reversed back higher.
1.902 was the low price point the last time the natural gas market bottomed in April 2012. This area could again could be a multi-year low during 2015. But the market will need to see a further drop in daily production, an increase in winter heating demand or a combination of the two in order to reverse the current slide in the market price.
Market fundamental remain bearish for natural gas prices. But there are still many months of potential winter heating demand ahead. It might be a bit early to get too bearish the natural gas market at this point.
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