Spot natural gas prices (CFDS ON NATURAL GAS) settled down during its early trading on Thursday, achieving slight daily gains until the moment of writing this report, by 0.99%. It settled at $3.376 per million British thermal units, after declining during yesterday’s trading by 0.99%.
Natural gas futures were once again in a free fall on Wednesday, as is the case for most of the trading sessions at the start of the new year, amid rising production and continuing fair weather as the market prepared for a weak inventory draw.
After gains of about 16.7 cents a day earlier, gas futures contracts for February on Nymex settled at $3.311 per million British thermal units on Wednesday, down 27.5 cents on the day, while the March contract fell by 14.2 cents to 3.111. dollar.
Reflecting the momentum gathered in 2022 after rising domestic demand and Europe's pressing need for US exports, production exceeded about 102 billion cubic feet per day, according to Bloomberg estimates on Wednesday, bringing it in line with record levels.
However, due to the seasonally mild weather across large swaths of the United States from south to east to start 2023, demand has diminished and prices are down more than 50% from late last year. Forecasts show the return of more common winter weather in the last week of January. But the weather forecast fluctuates on a daily basis and has left traders skeptical about the severity and duration of the coming cold.
Analysts say the market is poised to read bearish inventories again this week, this will come on the heels of the rare January injection of 11 Bcf reported by the US Energy Information Administration (EIA) for the week ending January 6th.
Expected estimates ranged between 53 billion cubic feet and 81 billion cubic feet, with an average of 73 billion cubic feet. Estimates compare with a five-year average withdrawal of 156 billion cubic feet, and a year-earlier withdrawal of 203 billion cubic feet.
Natural Gas Technical Analysis
- Technically, the price confirmed, in its recent trades, the breach of the pivotal support level of 3.618, amid the dominance of the bearish trend in the short term, along a slope line.
- This is shown in the attached chart for a (daily) period, with the continuation of the negative pressure for its trading below the simple moving average for the previous 50-day period, as well.
We notice that a negative crossover has started to appear again with the relative strength indicators. Therefore, our expectations indicate a further decline for natural gas during its upcoming trading, as long as it stabilizes below the 3.618 level, to target the 3.098 support level.
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