Natural Gas Corner - Market Update - Market May Be In Early Stages Of Bottoming

Natural gas prices closed firm for a third day after trading on both sides of unchanged during Tuesday's session.

The back end of the natural gas price curve continues to strength to a greater degree than the nearby dated contracts which could be a leading indicator of a near term low forming in the market.

The key technical support level also held at the 1.611 spot contract low reached three times over the past 4 trading sessions.  By the market holding above this low, it has spurred short covering late last week and early this week.  And as witnessed in recent trade in the crude oil market which is up nearly 40% from the February low, this can quickly turn into something more.  A change in momentum can lead to a price rise even with fundamentals for a market remaining negative.  That is the hallmark of a short-covering rally.

The seasonal trend chart also suggests a post-winter low could be forming in natural gas in the face of very bearish fundamental headwinds including:

• record high storage
• bearish weather forecasts
• record high production

The Bentek production estimate for early-March is estimating 73.3 Bcf per day of dry-gas production in the U.S., just under the all-time high of 73.8 Bcf per day reached in late-February.

Storage is projected to end March at either the highest or second highest level on record heading into the summer cooling season.

If a summer rally does form, it will be an opportunity to short the natural gas market ahead of the anticipated post-summer seasonal low. It is during the second seasonal price break that a low price point for the year is typically set.

With storage possibly reaching another new all-time high ahead of the upcoming winter, the natural gas market could see further weakness later this year.