With storage adequacy concerns continuing to stir, natural gas futures rallied further in early trading Wednesday. After soaring 60.1 cents higher in the previous session, the September Nymex contract was up 22.7 cents to $9.556/MMBtu at around 8:50 a.m. ET.
There were no major changes to the weather outlook overnight, with the European model continuing to advertise a “seasonal pattern” over much of the next two weeks, according to NatGasWeather.
“While U.S. weather patterns have trended cooler to be more seasonal for the coming two weeks…the natural gas markets are clearly looking further out” to the upcoming winter, NatGasWeather said. Bullish sentiment could be driven by “tight supplies and hopes for a colder than normal winter that will increase deficits further.”
Recent history suggests winter temperatures have tended to come in warmer than normal, but the “narrative of tight gas supplies has overtaken the natural gas markets around the world, exacerbated by Russia decreasing flows to Europe,” the firm added.
Recent gains for Henry Hub seem to suggest domestic prices trading “sympathetically” to the rallying Dutch Title Transfer Facility (TTF) in Europe, according to Tudor, Pickering, Holt & Co. (TPH) analysts.
TTF “has continued to catch a bid to eye-watering levels despite having closed the gap to the five-year average on inventories,” the TPH analysts said.
The analysts said they see “limited risk on our base case to the U.S. running out of storage this winter on normal weather.” However, “a higher TTF price presents a higher potential ceiling to Henry Hub should Old Man Winter show up in the Lower 48.”
Potential market-moving developments going forward include the timing of the 2 Bcf/d Freeport LNG terminal’s ramp-up toward a return to full service and the duration of the supply dip observed in Tuesday’s production estimates, according to the TPH analysts.
Technically speaking, with Tuesday’s rally the September contract broke through a pair of key resistance targets at $9.015 and $9.277 pegged by ICAP Technical Analysis.
“But the bulls cannot claim victory yet,” ICAP analyst Brian LaRose said. “…The bulls still need to get through the prior highs at $9.419, $9.598, $9.664 and $9.752, the band of resistance at $9.865-9.927, and the .618 retracement at $10.299. Only then will we have confirmed an upside breakout on our hands. The real work starts now.”
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