Daily natural gas market update - 3 January [Institutional research preview]

The following report is a guest contribution from Carl Neill, Senior Analyst - Energy at StoneX. This report is free preview of the type of deep-dive, institutional-level research that his team is putting out every day. If you find this report interesting, please consider subscribing to the Energy team's research directly to receive all of their insights directly and review past reports.

FUNDAMENTALS & WEATHER

Natural gas prices have weakened substantially over the past two weeks and are down again today as January weather forecasts remain bearish for prices. Natural gas prices are fallen by over 30% during the past two weeks as weather forecasts for January turning markedly warmer offsetting large storage draws and a brief decline in production.
 

Source: StoneX Market Intelligence

The storage withdrawal for week ended 12/23 was 213 Bcf, well above the 5-year average of 106 Bcf.  The next two withdrawals are expected to total just 96 Bcf with Gas Daily projecting the withdrawal for week ended 01/06 at zero.

Source: StoneX Market Intelligence 

Production which declined by nearly 20 Bcf per day or 20% last week due to freeze-offs in the production areas has recovered and is currently averaging 97.4 Bcf per day.  Reuters has lowered their 2023 production forecast now expecting production to reach 105 Bcf per day by November.

The Freeport LNG facility which has been offline since last June is expected to be back online by the end of January but no firm date has been set.  U.S. LNG exports are currently at 12 Bcf per day.

Source: NOAA

Oversea prices have also been weakening with the Dutch TTF natural gas contract down 78% from the 2022 high in comparison to a 60% decline in U.S. prices.

TECHNICAL ANALYSIS

Source: StoneX Market Intelligence 

 Natural gas prices are in a steep freefall in today’s early trade following two weeks of heavy losses which have erased 2.125 or 32% from the spot contract.   

After closing Friday’s session at 4.475, the spot February contract is down another .420 or 9.3% in today’s session.

The highlight of last week’s trade was a breakout under 2 ½+ year trend line support just under the 5.000 level which keeps prices in a bearish downtrend.

The 4.750 October low has been broken as support turning 3.880-3.900 into the next area of support.

Longer term support is the December 2020 low at 3.536.

Moving Average Alignment – Bearish
Long Term Trend Following Index – Bearish
Short Term Trend Following Index – Bearish

Relative Strength Index – 31.55

If you find this report interesting, please consider subscribing to the Energy team's research directly to receive all of their insights directly and review past reports.

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