November natural gas futures continued their downward march Monday as traders focused on unsupportive weather conditions and expectations of another hefty shoulder-season addition to inventories. At the close November posted a 10.4 cent loss to $3.431 and December shed 5.5 cents to $3.870.
Trading down to $3.410, the front-month contract reached a new 13-month low.
“This market just can’t sustain any rally, and the opinion is that lower prices are ahead. $3.25 is the next support zone,” said a New York floor trader. He added that he thought there would be scale-down buying in the low $3.30 to mid $3.20 range, and “after that I think traders will try to kick it back up to the $3.45 area, and if they can’t do that, they will knock it back down again.”
“It hasn’t been exactly open-window weather, but it hasn’t been turn-on-the-furnace weather either. It looks like there won’t be any weather input to the market until the seasons actually change.”
Analysts suggest a more bearish weather-storage dynamic than previously thought may be in play.
“The market also appears to be in the process of discounting another bearish storage figure on Thursday that could stretch the y[ear] over y[ear] deficit dramatically since the injection could easily exceed last week’s large 91 Bcf build,” said Jim Ritterbusch of Ritterbusch and Associates. It was Ritterbusch’ observation that “this week’s temperatures across the upper mid- continent are shaping up to be a bit more mild than previously expected, a development that ups the possibility of another above normal supply hike in next week’s numbers. At the end of the day, peak supply estimates are being quickly adjusted upward in the process of factoring in downsized HDDs, a diminished hurricane factor and anecdotal evidence of some slippage in industrial demand,” he said in an afternoon note to clients.
Market technicians see natural gas on a path to fall at least another 30 cents. “While natgas has been taking its sweet time breaking lower, it is still breaking lower,” said Walter Zimmerman, vice president at United-ICAP. Natural gas futures did put in a new low close on the year Friday at $3.535. “We are still targeting $3.240-3.200 minimum and then on down to the $2.960 to $2.900 area if the $3.200 level fails to hold.”
He added that his figures also show the 12-month natural gas strip grinding lower as well. “Our same wave count analysis on the 12-month strip targets the $3.850 to $3.760 area, and we have no candidates for major support between here and there,” he said in a weekend report to clients.
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