September natural gas is expected to open 2 cents lower Tuesday morning at $2.82 as traders anticipate near-term weakness and await lower prices consistent with ultimately taking a bullish position. Overnight oil markets plunged.
From a technical standpoint natural gas is mired in mediocrity. "Still stuck in neutral territory," said Brian LaRose, technical analyst at United ICAP in closing comments to clients. "Bulls need to push natural gas through the $2.939 level to open room up to $3.115. Bears need to push natural gas beneath $2.706 to signal a test of the $2.556/2.443 lows is ahead.
"In between support and resistance we are stuck sitting on our hands. At the moment the technicals still favor the bulls. But are they finally ready to take advantage?"
Fundamental analysts see a market causing equal angst among both bulls and bears. "This market continues to frustrate both the bulls and the bears given its lack of sustainable price movement in either direction," said Jim Ritterbusch of Ritterbusch and Associates in morning comments to clients. "We are continuing to emphasize that supply/usage is maintaining a relative balance for a time of year when cooling needs tend to crank up price volatility. Although Thursday's storage report will likely show some expansion in the supply surplus against 5 year average levels, the adjustment is apt to be small in keeping the overhang modest at less than 85-90 Bcf.
"Within such an environment, even a shocker of a supply number may exert only limited price increase as was vividly displayed last week when the bullish miss of more than 10 Bcf failed to drive sustained price gains. We would ideally prefer to approach the market from the long side as we see our expected $2.65 support more sustainable over the long term period than our anticipated resistance at the $3.00 area. But, an implied price decline of some 15-20 cents will likely require evidence of a broad based cool down capable of pushing the supply surplus into triple digit territory."
Tom Saal, vice president at FC Stone Latin America, LLC in his work with Market Profile expects the market to test Monday's value area at $2.843 to $2.827 before moving on and testing $2.814 to $2.790.
He points out in a morning note to clients that "[Monday's] Market Profile pattern was a 'non-trend day' structure, showing intense price control or equlibrium. Look for the market to work lower today and maybe the rest of the week..however, note the 'trend day space'...."
Saal identifies the nearest trend day space at $2.902 to $2.886. "Trend day 'space' is areas of illiquidity, or no price control, which can act like magnet when prices approach this area."
In overnight Globex trading September crude oil fell $1.20 to $43.76/bbl and September RBOB gasoline shed 2 cents to $1.6774/gallon.