Friday, April 12, 2013
Dominick Chirichella: Natural Gas Prices Remain Firm
The Nat Gas futures contract is entering a trading zone that has not been seen since the middle of 2011 or before the large imbalance of supply over demand started to take hold. If the spot contract can remain above the $4.16/mmbtu level it has a relatively clear area all the way to around the $4.40/mmbtu level. From a technical perspective the market is clearly in a bullish pattern as long as the spot contract remains above the new support level of around $4.16/mmbtu.
From a fundamental viewpoint the market is in the midst of a changing weather pattern as most of the country starts to experience spring like temperatures against a backdrop of the inventory cushion now solidly below normal as well as strongly below last year at this time. The fundamentals are going to have to provide support for the technical to remain in the new higher trading range.
The latest six to ten day and eight to fourteen day NOAA forecasts are providing a modest level of potential fundamental support as both forecasts are now projecting a large portion of the middle section of the US expecting below normal temperatures for the April 17th to April 25th timeframe. The forecast does not mean that there will be a significant amount of heating demand but it does mean there will be some in various parts of the country and it could result in injections coming in below both last year and the five year for the same timeframe thus widening the deficit further versus current levels.
Yesterday's EIA report was bullish versus the historical data but neutral to slightly bearish versus a comparison to the market consensus. The report showed a net withdrawal that was below the market expectations but greater than both last year and the five year average net injections for the same period. The 14 BCF withdrawal (strongly atypical for this time of the year) was below the market consensus calling for a withdrawal of around 21 BCF. The draw of 14 BCF was very near my model forecast (-15 BCF withdrawal) this week. The year over year inventory situation remains in a strong deficit position versus last year and has widened this week while the deficit versus the more normal five year average has also widened. The current inventory deficit came in at 66 BCF versus the normal five year average or about a negative 3.8 percent.
Read the entire CME Group article
Time to catch up on the Trend Jumper trades from this week