The natural gas market started the new week of trade with another very large sell off as the front month April 16 contract was sold down to a new contract low losing 4.5% on the day.
The one positive note for the bulls was the inability for the April contract to push down to a new weekly low with 1.682-1.684 support holding. The April contract bottomed out at a 1.690 intraday low settling the session at 1.711.
The early-March weather forecasts turned much warmer over the weekend providing the initial spark for today's selloff. Production also continues to outperform expectations holding at 73.4 Bcf per day (dry-gas production) in February, a new monthly high.
With milder weather forecast predicting very little end of winter demand for natural gas, end of March storage could top the 2,250 Bcf level, the second highest on record for the month.
It will be interesting to see if the natural gas market can push down to new lows or if the trend may have exhausted itself for the near term.
Without a hot summer boosting demand of natural gas for cooling, the natural gas market should be looking at a second consecutive year of record high storage near the end of 2016.
natural gas
Monday, February 29, 2016
Dow Jones - Natural Gas Prices Fall To 17-Year Low
DJ Natural Gas Prices Fall to 17-Year Low
By Nicole Friedman
NEW YORK--The U.S. natural gas market faces another year of ultralow prices as winter comes to an end and the
start of liquefied natural gas exports has failed to boost prices.
Natural gas prices plunged to their lowest level since the 1990s Monday as weather forecasts for the next two
weeks turned warmer.
Winter typically marks the peak of natural gas demand as homes and offices turn up the heat. About half of U.S.
households use natural gas as their primary heating fuel.
But the El Ni?o weather phenomenon has kept temperatures warmer than normal across much of the U.S. this
year, reducing natural-gas demand.
Weather forecasts released Monday called for warmer weather in the next two weeks than previously expected,
squashing any expectations that a late-winter cold spell could help shrink the oversupply of natural gas.
Natural gas futures for April delivery recently fell 6.5 cents, or 3.6%, to $1.726 a million British thermal units
on the New York Mercantile Exchange. Prices traded as low as $1.69/mmBtu earlier in the session, on track for the
lowest settlement since March 1999.
Natural gas prices have slumped in recent years as a shale-drilling boom in the U.S. pushed production to record
levels.
Output remains high, even as companies have sharply cut spending on new drilling due to plummeting oil prices.
"Each passing week increasingly feels like a stroll up the down escalator," said Shikha Chaturvedi, analyst at
J.P. Morgan, in a note. "Rising production [and mild weather] will pressure and extend the ongoing pricing malaise."
Analysts expect prices to remain subdued this year due to the massive glut of natural gas sitting in storage.
Natural-gas inventories stood at 2.584 trillion cubic feet as of Feb. 19, 29% above the five-year average for this time
of year, according to the Energy Information Administration.
Natural-gas stockpiles typically shrink during the winter when consumption is strong, then grow between April and
October as producers prepare for the next winter. That leaves only a few weeks left this season for storage
withdrawals.
"Even allowing for an unusually hot summer that could slow supply injections, it appears that spot prices will
need to be maintained at sub $2 levels in order to preclude storage overcrowding next fall," said energy-advisory firm
Ritterbusch & Associates in a note.
Analysts have long expected the start of U.S. LNG exports to lift the market, as the domestic glut would be
absorbed by overseas demand, especially in Asia. But the international natural-gas market is also oversupplied, pushing
down LNG prices and reducing the demand for U.S. fuel. The first U.S. LNG tanker for export left the country last week,
but domestic prices have remained subdued.
Write to Nicole Friedman at nicole.friedman@wsj.com
(END) Dow Jones Newswires
February 29, 2016 10:58 ET (15:58 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
022916 15:58 -- GMT
------
By Nicole Friedman
NEW YORK--The U.S. natural gas market faces another year of ultralow prices as winter comes to an end and the
start of liquefied natural gas exports has failed to boost prices.
Natural gas prices plunged to their lowest level since the 1990s Monday as weather forecasts for the next two
weeks turned warmer.
Winter typically marks the peak of natural gas demand as homes and offices turn up the heat. About half of U.S.
households use natural gas as their primary heating fuel.
But the El Ni?o weather phenomenon has kept temperatures warmer than normal across much of the U.S. this
year, reducing natural-gas demand.
Weather forecasts released Monday called for warmer weather in the next two weeks than previously expected,
squashing any expectations that a late-winter cold spell could help shrink the oversupply of natural gas.
Natural gas futures for April delivery recently fell 6.5 cents, or 3.6%, to $1.726 a million British thermal units
on the New York Mercantile Exchange. Prices traded as low as $1.69/mmBtu earlier in the session, on track for the
lowest settlement since March 1999.
Natural gas prices have slumped in recent years as a shale-drilling boom in the U.S. pushed production to record
levels.
Output remains high, even as companies have sharply cut spending on new drilling due to plummeting oil prices.
"Each passing week increasingly feels like a stroll up the down escalator," said Shikha Chaturvedi, analyst at
J.P. Morgan, in a note. "Rising production [and mild weather] will pressure and extend the ongoing pricing malaise."
Analysts expect prices to remain subdued this year due to the massive glut of natural gas sitting in storage.
Natural-gas inventories stood at 2.584 trillion cubic feet as of Feb. 19, 29% above the five-year average for this time
of year, according to the Energy Information Administration.
Natural-gas stockpiles typically shrink during the winter when consumption is strong, then grow between April and
October as producers prepare for the next winter. That leaves only a few weeks left this season for storage
withdrawals.
"Even allowing for an unusually hot summer that could slow supply injections, it appears that spot prices will
need to be maintained at sub $2 levels in order to preclude storage overcrowding next fall," said energy-advisory firm
Ritterbusch & Associates in a note.
Analysts have long expected the start of U.S. LNG exports to lift the market, as the domestic glut would be
absorbed by overseas demand, especially in Asia. But the international natural-gas market is also oversupplied, pushing
down LNG prices and reducing the demand for U.S. fuel. The first U.S. LNG tanker for export left the country last week,
but domestic prices have remained subdued.
Write to Nicole Friedman at nicole.friedman@wsj.com
(END) Dow Jones Newswires
February 29, 2016 10:58 ET (15:58 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
022916 15:58 -- GMT
------
Natural Gas Corner - Technical Update - Key Support Level Being Tested On Monday
The April 16 natural gas contract has sold down to a new
contract low at 1.690 in the overnight session as the market again retests an
important area of support.
This support is a spot contract low first posted last December
at the 1.684 level and subsequently tested last week by the expired March 16
contract which bottomed out at a 1.682 low.
A drop under 1.682-1.684 weekly low support would keep the
primary market trend down with the next
support from the monthly chart coming in
a 1.610.
Former support at 1.730-1.740 now becomes the first area of
upside resistance followed by the 10 day moving average currently at 1.855.
Friday’s Commitment of Trader’s report showed the funds long
65,117 natural gas futures, up 3,422 contracts from the previous week.
Technical Indicators:
Moving Average Alignment – Bearish
Long
Term Trend Following Index – Bearish
Short Term Trend Following Index - Bearish
Friday, February 26, 2016
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