March natural gas prices had a gap lower open below Friday’s low and went on to challenge short-term support at $2.405. It appears that weakness in the natural gas market continues to come from above normal temperatures in key demand areas in the US. The latest 6 to 10 day weather maps show above normal temperatures in the upper Northeast and a large swath of average to below average temperatures for the Western half of the country, offering little support for heat-related demand for natural gas. This situation was also highlighted by data earlier this morning from the National Weather Service, which forecasted US heat-related demand for natural gas to average around 8.0% below normal in the coming week. Meanwhile, US natural gas production is running at near record levels and is expected to end the winter withdrawal season at a new record high, around 35% above average. This oversupply situation has sparked added concern in the market that the storage glut could offer even more downside pressure on natural gas prices. In the meantime, prospects for more US production cuts from Cheseapeake due to the historically low prices offer a potential positive. Another potential positive for the natural gas market comes from the latest gas-directed rig count data from Baker Hughes that showed its 5th weekly decline to 720, which is a new 28 month low. The Commitments of Traders Futures and Options report as of February 7th showed non-commercial traders were net short 127,712 contracts, for a small decrease on the week. Non-commercial and non-reportable traders combined held a net short position of 99,931 contracts, for a decrease of 3,056 on the week.
NATURAL GAS (MAR): Momentum studies trending lower at mid-range should accelerate a move lower if support levels are taken out. The market’s short-term trend is negative as the close remains below the 9-day moving average. It is a slightly negative indicator that the close was under the swing pivot. The next downside objective is now at 2.405. The next area of resistance is around 2.511 and 2.558, while 1st support hits today at 2.435 and below there at 2.405.
StockMarketNews Research Team