April natural gas is set to open 4 cents higher Tuesday morning at $1.86. as traders see a market recovering from oversold conditions and fundamentals providing little reason for prices to continue higher. Overnight oil markets fell.
Despite recent market strength, analysts don't see much in the way of bullish factors capable of generating a sustained price advance. "This market appears poised for a pause following the dramatic price decline that has been developing since the winter of 2014," said Jim Ritterbusch of Ritterbusch and Associates in a Tuesday morning report to clients.
"We will reiterate that the process of capturing the final 30-35 cents of a $4.50 price decline will prove arduous and could require a few more weeks, especially if production shows any signs of significant slippage. Evidence in this regard has not been seen thus far as output remains elevated by about 1.5-2% above a year ago and is apt to maintain year over year gains through most of this year. About the only bullish consideration that we can cite is the fact that the market has recently become technically oversold and is requiring a significant price advance in order to attract fresh speculative selling.
"But we also feel that the large non-commercial entities have available capital to employ toward bearish strategies with the short-to-long ratio that we monitor at about 1.79 to 1. We usually view a ratio of 2 to 1 as representing the red zone in which the funds are fully allocated toward the short side. With this in mind, the possibility of some fresh three-week highs in today's trade may not see much upside follow-through."
LNG export activity continues at Sabine Pass LNG in preparation for full-scale export activities. Industry consultant Genscape said "The Office of Energy Projects has authorized Sabine Pass LNG to continue commissioning activities at Train 1, including the loading systems, meaning limited loading and export of produced LNG for commissioning cargoes. The authorization is in response to Sabine's request on Feb. 24th and supplemented on March 10th. In this authorization Sabine will file weekly reports moving forward on the ongoing commissioning activities until the Commission authorizes the commencement of service. These reports have to demonstrate progress in the 'punch list' items needed to show safe and reliable operation of the facility."
The first shipment of LNG from Sabine Pass left late February on the Asia Vision for Brazil (see Daily GPI, Feb. 24).
"Sabine also continues to show progress on Train 2 and its start to commissioning. On Friday afternoon, Genscape's infrared monitors have seen initial commissioning activity begin at the compressor stacks on Train 2. This follows the approval on March 3rd for Sabine to introduce fuel gas to Train 2. Last but not least, the Clean Ocean LNG vessel made its way into the Sabine berth on Friday afternoon to take the second LNG export cargo produced at Train 1. This 3.31 Bcf ship has been waiting out in the Gulf of Mexico.
In overnight Globex trading April crude oil fell $1.07 to $36.11/bbl and April RBOB gasoline shed 3 cents to $1.3919/gal.