But as noted in yesterday's commentary, while the front end of the price curve is weak, the back end of the curve has been strengthening and could be an early indication that a market low is near.
The winter 16-17 natural gas strip (November 16-March 17 contracts) bottomed out on February 25th at a 2.400 low but is currently trading at 2.530, .130 or 5.4% above last week's low.
Strength on the back end of the curve could be temporary event but recent news in the market has been overwhelmingly bearish and negative as is market sentiment. When market sentiment reaches an extreme as it may have in natural gas, reversals can form.
Tomorrow's EIA weekly storage report could be a catalyst for a reversal as it is expected to be quite low. Early estimates are for a 40-50 Bcf withdrawal well below last year's 227 Bcf pull and the 137 Bcf withdrawal averaged over the past 5-years. A bullish surprise on the upside with tomorrow's report could spur short-covering which could turn into something more.
Overall fundamentals including storage (2nd highest ever), production (all-time high), and weather demand (expected to be low) remain negative. Another factor that could help form a near term low would be continued above-normal temperatures which could indicate an early start to the summer cooling season.
With today's weakness in the market, it faces another key test tomorrow with the weekly storage report. If lower-1.600 support is broken, the market could see a quick drop toward the 1.500 level.
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