After checking higher for much of the session Wednesday, natural gas futures moved back down to near unchanged, despite the release of a lower-than-expected storage injection figure. Buyers propelled the December contract back above the psychologically important $3.00 level just as the report was released. However, the advance failed to retest Monday’s $3.08 high, and that was a sign of weakness to traders. The December contract sifted lower from that point, closing with a one-cent loss at $2.87.
According to the American Gas Association, 10 Bcf was added to underground storage facilities for the week ending Nov. 2, bringing working gas levels to an even 3,100 Bcf. The refill was bullish, not only because it fell short of expectations centered around the 25 Bcf area, but also because it was just a fraction of last year’s 36 Bcf injection. Storage now stands 352 Bcf above year-ago levels, down from the 471 Bcf peak of a month ago.
The Eastern Consuming Region and the Western Consuming Region each showed a 4 Bcf injection to reach 1,786 Bcf and 473 Bcf levels, respectively. Meanwhile the Producing Region injected 2 Bcf last week, bringing it back to the 841 Bcf level it held prior to the 2 Bcf withdrawal of the week before.
Looking ahead, even the most dyed-in-the-wool bull trader is skeptical of the market’s ability to rebound to the $3.00-plus area. For most traders, the market’s failure to rally yesterday in the face of a supportive storage report sent a message that prices are heading lower. “If prices can’t rally on a 10 Bcf injection, what will they rally on?” a trader questioned
The short answer to the trader’s rhetorical question is of course “cold weather,” however that does not look likely in the near term. In its daily update of its six- to 10-day weather forecast, the National Weather Service calls for continued above normal temperatures across the entire country through at least Nov. 17.
However, shrugged-off storage reports and mild weather forecasts were not the only factors pointing to lower prices Wednesday. Also at work were technical factors, which are becoming increasingly unfriendly to bulls. According to Tom Saal of Pioneer Futures in Miami, the market is oversold, but needs to close above an important Fibonacci retracement extension at $3.035 before those shorts will look to cover. The December contract was only able to notch a $3.02 high yesterday.
On the downside, Saal targets potential support at Tuesday’s $2.785 low, which corresponds closely with trendline support from the December 120 minute chart.
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