Natural gas futures continued to skid lower in early trading Tuesday, weighed down by bearish technical factors and an ongoing lack of impressive cold in the latest forecasts.
After dropping 11.4 cents before the weekend, the March Nymex contract was down another 9.4 cents to $2.181/MMBtu at around 8:45 a.m. ET.
Friday’s 11.4-cent sell-off saw the front month break below “critical technical support” at the $2.35 level, EBW Analytics Group analyst Eli Rubin observed.
A notable decline in weather-driven demand over the holiday weekend “coupled with a strongly bearish technical outlook opens the door to further losses,” Rubin said.
This comes as upcoming Energy Information Administration (EIA) storage reports are poised to reveal a growing storage cushion on unseasonably light winter withdrawals, the analyst noted.
“Fundamentally, the gas market still needs to clear another pair of extraordinarily bearish EIA reports before the storage surplus flattens,” Rubin said. Mild weather for the Feb. 17-23 storage period “may largely normalize” for subsequent storage weeks.
Trading this week is likely to “hinge around” the upcoming options expiration and final settlement of the March contract, according to Rubin.
“Although the breakdown of technical support opens the door to notable further losses for natural gas, solidifying fundamentals may offer support after the March contract rolls off the board and April becomes the front-month contract,” Rubin said.
Looking at the latest weather outlook, after warmer trends over the weekend break, models underwent colder adjustments overnight, NatGasWeather said early Tuesday.
“The coming pattern is viewed as being a little better compared to what the natural gas markets saw ahead of the Sunday reopen, although still not cold enough to intimidate, with near-seasonal demand much of the next 15 days,” NatGasWeather said. The exception will be a brief period of stronger demand Friday and Saturday “as frigid air impacts much of the western and northern U.S.”
In the longer-range forecasting, much of the data “favors a relatively cold U.S. pattern March 10-31,” the firm said.
However, markets are likely to approach this with skepticism given “colder patterns in the longer-range have consistently trended warmer in time this winter,” NatGasWeather added.
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February 21, 2023 at 09:05PM
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Technical Outlook Said 'Strongly Bearish' as Natural Gas Futures Extend Slide Early - Natural Gas Intelligence
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