Rumors that the winter heating season was over appear to be unfounded as the East has once again dipped below freezing, sparking natural gas futures to search for higher ground. April natural gas impressively climbed 26.1 cents in trading on Friday to close at $6.715, half of a cent off its high for the session. March expired on Thursday at $6.304.
For the week, April finished 72.8 cents higher than its previous Friday settle. The prompt month’s course was only in question once on Friday, when prices began to retreat late in the session. However, April natural gas rebounded just prior to settlement.
“[Friday’s] action was quite impressive once again,” a Washington, DC-based broker said. “It was a strong up day, where the little dips were met with good waves of buying behind them. On Thursday, we pierced that old high of $6.61 and then sold off a little bit, which might have given people a little concern that that was it. On Friday, we powered right back through it again and closed on the high, which is a very bullish signal.”
The broker noted that according to his rough calculations, $6.73 would represent a 50% retracement of the whole down move that began near Halloween and finished right around New Year’s. “The fact that we finished near the high on the day makes me feel pretty strongly that we will push through the $6.73 level, which would put us on track up into the mid $6.80s,” he said.
The broker noted that the futures market is currently feeding off of a number of things, including a bullish weather picture. “It now looks like Accuweather is calling for a big convergence of storm systems in the East next week, like a Nor’easter meeting an Alberta Clipper,” he said. “Just when you thought winter was over, now we will have to wait and see.
“After the market was unable to push back down to the original low that was set around New Year’s, I knew it would probably resolve to the upside…and it looks like it has,” the broker said. “I think we will push through the $6.73 and my intermediate target is $6.84. The next level up would be a retracement up to $6.97.”
Despite the new band of cold weather in the East, the broker said the current gas storage situation will not be changed. “This really won’t affect where we come out of the winter season with respect to storage,” he said. “We are still going to have plenty of gas. There just aren’t enough days left — even with the cold — to gouge into the surplus of natural gas underground.”
IFR Energy Services’ Tim Evans said he is not so sure that this uptrend has legs. “While there is some cold in the forecast, we note the variances from normal look for the most part like they are less than in late January, so it’s ironic to see prices trading at a higher level now, even on a spot basis, than they did then,” he said.
Evans said April natural gas has established $6.40 as its “line in the sand,” with a reversal back below that mark signaling a “serous contradiction” of the uptrend. “The rally here is powerful, and we think fragile all at the same time, lacking the self esteem that comes from the true accomplishment of actual physical tightness,” he said. “On the upside, the market was able to run stops over the $6.61-6.62 highs of Jan. 18 and Thursday, trading to as much as $6.72. A further extension of the advance could try for the next tranche of even longer-term buy stops that are likely parked just beyond the $6.84 high from Dec. 17.”
Â©Copyright 2005Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.
© 2023 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 |