Natural Gas Forecast April 2, 2012, Technical Analysis

The natural gas markets fell yet again during the Friday session as the $2.20 level has now given way. The fall and speed of this downtrend has truly been something to behold, and it appears that only the foolish dare to buy this market. However, as the market is still above zero, there certainly are people out there that are willing to buy this market – perhaps expecting the inevitable bounce, or even thinking that the market “has fallen too far”. This is analogous to catching a falling knife, but there is almost always someone out there to do exactly that.

There is absolutely no reason to think about buying this market, and all you would need to do is look at the trend over the last year to realize that buying has only brought massive losses for the buyer, and as such we can only trade in one direction – short.

The $2 level seems to be calling, and there is nothing to suggest it isn’t going to be found. In fact, a “one handle” is almost assured at this point. With the massive amounts of natural gas to be found in North America alone, there is little doubt that the US consumption can be taken care of quite easily. In fact, this isn’t a short-term situation, but rather a long-term one. There are present estimates that the US is sitting on over 300 years worth of energy, and this doesn’t take into account Canadian energy as well. In other words – there is a low likelihood that buying natural gas will be anything but a short-term trade for the foreseeable future. Knowing this, it is hard to get involved from the long side, and we find it much more palatable to sell on bounces as the long-term trend is almost certain at this point.

We are happy to sell any all bounces that show signs of weakness, especially those that happen at multiples of 20 cents, which seems to be the pattern in this market. We would also be willing to sell new lows, but fully expect the $2 mark to create a bounce – a bounce we will not hesitate to sell. 

Natural Gas Forecast April 2, 2012, Technical Analysis
Natural Gas Forecast April 2, 2012, Technical Analysis

Natural Gas Forecast for the Week of April 2, 2012, Technical Analysis

The natural gas markets continued to fall during the previous week, this time smashing through the $2.40 support level. The trend is obviously down, and it is hard to think that it is going to change anytime soon. Sure, there will be the occasional bounce, but they will just be that – a simple bounce. There is far too much supply on the market, and demand will not catch up to it anytime soon.

The $2 level will more than likely cause one of these bounces, but will turn out to be a selling opportunity yet again. The $1 level is being predicted by some analysts at this point in time, and to be honest – there is nothing in this chart that refutes that notion. The rallies are to be sold, and we prefer to use those as entries as it creates a better point to sell from. However, new lows can work as well. 

Natural Gas Forecast for the Week of April 2, 2012, Technical Analysis
Natural Gas Forecast for the Week of April 2, 2012, Technical Analysis

Natural Gas Weekly Fundamental Analysis April 2-6, 2012, Forecast

Introduction: Natural gas is nevertheless a major commodity in its own right, which is used for everything from cooking food to heating houses during the winter. Natural Gas is growing much faster than either of its non-renewable fossil fuel competitors, oil and coal.

Do not miss the weekly U.S. gas inventories report. The figures are issued by the Energy Information Administration (EIA) every Thursday afternoon at 15:30 (released Friday at 15:30 if there was a U.S. bank holiday on Monday). Here’s a link to the latest EIA report. The main natural gas moving figure in there is the change in inventories from the previous week. When it comes to the gas inventories report, we’re talking about billions of cubic feet, Bcf for short.

When the actual change in inventories number is released, it is the deviation from the expected number that is really important. If the actual inventories figure shows a 24 Bcf rise when an 84 Bcf increase was expected, then that is actually positive for the price of natural gas. All else equal, the price of natural gas should rise after the release.

A barrel of oil has roughly 6 times the energy content of natural gas. If the fuels were perfect substitutes, oil prices would tend to be about 6 times natural gas prices. However, due to various market characteristics discussed briefly above and the ease of using oil, the price of oil has been following a pattern of 8-12 times that of natural gas. However that ratio has spiked dramatically since March 2009.

Analysis and Recommendation:

Natural Gas fell to a record low, of 2.1135 and is currently trading at 2.12 after a drop from the high of 2.4190. With the end of winter, an early and warm spring, there is no demand for NG for heating purposes. Inventories this week were far in excess of forecast, leaving a glut in the marketplace with little demand to use up the high inventories.

Working gas in storage was 2,437 Bcf as of Friday, March 23, 2012, according to EIA estimates. This represents a net increase of 57 Bcf from the previous week. Stocks were 816 Bcf higher than last year at this time and 900 Bcf above the 5-year average of 1,537 Bcf. In the East Region, stocks were 403 Bcf above the 5-year average following net injections of 25 Bcf. Stocks in the Producing Region were 392 Bcf above the 5-year average of 627 Bcf after a net injection of 34 Bcf. Stocks in the West Region were 104 Bcf above the 5-year average after a net drawdown of 2 Bcf. At 2,437 Bcf, total working gas is above the 5-year historical range.

Working gas stocks in the Producing Region, for the week ending March 23, 2012, totaled 1,019 Bcf, with 249 Bcf in salt cavern facilities and 770 Bcf in nonsalt cavern facilities. Working gas stocks increased 17 Bcf in the salt cavern facilities and increased 18 Bcf in the nonsalt cavern facilities, since March 16

Historical:

High      5.13 January 2011

Low       2.1135 March 30, 2012

Economic Events: (GMT)

WEEKLY

Natural Gas Fundamental Analysis April 2, 2012, Forecast

Analysis and Recommendations:

Natural Gas hovered at a 10-year low, losing less than one cent to trade at $2.15 per btu.

A larger-than-expected increase in supplies took futures on Thursday to their lowest settlement in 10 years.

U.S. government data showed a larger-than-expected inventories increase for the week ended March 23. The U.S. Energy Information Administration reported an increase of 57 billion cubic feet. Analysts surveyed by Platts had expected a net injection between 43 bcf to 47 bcf for the week. 

Winter has ended lowering demand and leaving an excess supply. NG is looking for a bottom and it was expected to be in the 2.32 range, but with large of an increase in storage, there will be little need for any additional production.

Economic Events: (GMT)

WEEKLY

Natural Gas Forecast March 30, 2012, Technical Analysis

 

The natural gas markets fell yet again on Thursday as the bottom fell out of the support in the market. The $2 level seems almost assured at this point, and what was once considered to be a little overly enthusiastic – the “1” handle – looks as if it is about to become a reality. The supply of natural gas is just so extreme that it cannot be burned off fast enough.

The market obviously cannot be bought at this point, and we are selling it over and over. The $2.40 level looks as massive resistance now, and we will sell any rallies that come into play. Also, we could even be alright with simply selling in the present area as this trend looks likely to continue for much lower prices.

Natural Gas Forecast March 30, 2012, Technical Analysis
Natural Gas Forecast March 30, 2012, Technical Analysis

Natural Gas Fundamental Analysis March, 2012, Forecast

Analysis and Recommendations:

Natural Gas tumbled after the weekly EIA inventory reports showed a much higher inventory than expected. NG fell as low as 2.1330 to pick up a bit to trade at 2.1510. Gas plummeted from the opening at 2.269 after weekly figures were release.

U.S. government data showed a larger-than-expected inventories increase for the week ended March 23. The U.S. Energy Information Administration reported an increase of 57 billion cubic feet. Analysts surveyed by Platts had expected a net injection between 43 bcf to 47 bcf for the week. 

Winter has ended lowering demand and leaving an excess supply. NG is looking for a bottom and it was expected to be in the 2.32 range, but with this large of an increase in storage, there will be little need for any additional production. Gas most likely will plateau in this range.

 

Economic Events: (GMT)

WEEKLY

 

Natural Gas Forecast March 29, 2012, Technical Analysis

The natural gas markets fell again for the session on Wednesday as the trend continues to the down side. The bearishness in this market is truly astounding, and most definitely relentless. The recent action has seen a break of the $2.30 level, and this looks set to push the market much lower. The supply is far too large to think that the demand can take it out, and as a result we only sell this market. We are presently waiting for rallies to fade at this point as the last two days haven’t been convincing. However, there is absolutely no reason to buy this market now. $2.50 or so could make for a great resistance area to sell from.

Natural Gas Forecast March 29, 2012, Technical Analysis
Natural Gas Forecast March 29, 2012, Technical Analysis

Natural Gas Fundamental Analysis March 29, 2012, Forecast

Analysis and Recommendations:

Natural Gas climbed a bit today to reach 2.296, awaiting this week’s reports. NG is expected to remain in a very tight range until inventories are released and it will either remain at this level or move to the 2.32-2.36 channel to sit out the spring.

Unfortunately there is nothing else to report about this commodity.

 

Economic Events: (GMT)

WEEKLY

Natural Gas Forecast March 28, 2012, Technical Analysis

The natural gas markets continued to fall on Tuesday as the lows were broken, a signal that we said yesterday brings on another leg of selling. The market simply has fallen apart, and there is absolutely no reason to buy it under any circumstances. We are heading into one of the lightest seasons for natural gas usage of the year, so demand simply will not be there overall. With this in mind, we are adding to our short positions at this point. Selling from here is close enough as the trend is simply too powerful to allow any significant bounce from which to sell. 

Natural Gas Forecast March 28, 2012, Technical Analysis
Natural Gas Forecast March 28, 2012, Technical Analysis

Natural Gas Fundamental Analysis March 28, 2012, Forecast

Analysis and Recommendations:

Natural Gas continues to fall, as bargains hunters look for the bottom. There isn’t much else to report on this pair, until inventories are released later in the week. Seasonal demand is dwindling, consumption is nonexistent and supplies are falling as producers are halting production to the low price, which makes in unprofitable. Unfortunately, Natural Gas is a great energy alternative, easily available, but users have not driven up demand. Too much time has been spent on wind and solar power, while ignoring the benefits of NG.

We expect the price to settle by early April between 2.32-2.36. Today’s session saw NG drop from 2.3090 to 2.2950.

Economic Events: (GMT)

WEEKLY

Natural Gas Forecast March 27, 2012, Technical Analysis

 

The natural gas markets fell again on Monday in order to press against the market lows. The $2.30 level looks very supportive, but the level seems destined to give way as the market closed on the very lows of the session. The momentum is certainly with the bears, and buying at this point will be almost impossible. The selling of this contract is the only way to go, and we are willing to do that on a break below the lows for Monday. We also would sell any rallies that show signs of weakness as the various levels above, spaced at $2.40, $2.60, $2.80, and $3 should all be resistive.

Natural Gas Forecast March 27, 2012, Technical Analysis
Natural Gas Forecast March 27, 2012, Technical Analysis

Natural Gas Fundamental Analysis March 27, 2012, Forecast

Analysis and Recommendations:

Natural Gas is trading at 2.321 after climbing on speculation today to hit 2.419. In early morning hours, the NG price soared within the space of a few minutes to reach the high and then began to collapse returning to fall well below the opening of 2.382. The season for NG has ended now that winter if officially behind us and the demand for gas is dwindling. The only hope to push prices up with be an exceptionally warm spring and early summer. The demand for NG is consistent except for the use during winter for heating and summer for cooling which can put a strain on demands if the extreme temperatures or prolonged above or below average temperatures are forecast.

At this point, we have been forecasting NG to sit at the 2.32 – 2.36 level since the first of March. We expect it to remain in this range for the spring.

Economic Events: (GMT)

WEEKLY

 

Natural Gas Forecast March 26, 2012, Technical Analysis

The natural gas markets rose for most of the session on Friday, only to pullback and form a shooting star at the tail end of the massive move downwards. The trend is most certainly down, and the candle for the Friday session looks very weak. Because of this, we feel that perhaps we aren’t going to get the rally we wanted to fade, and we look to sell on a break lower at this point. Of course, if the bounce does come – we are more than willing to sell at the $2.40, $2.60, or $2.80 levels on signs of weakness. 

Natural Gas Forecast March 26, 2012, Technical Analysis
Natural Gas Forecast March 26, 2012, Technical Analysis

Natural Gas Forecast for the Week of March 26, 2012, Technical Analysis

The natural gas markets initially tried to rise during the week, but found it falling short by the end of the Friday session. The market formed a shooting star at the bottom of a massive move down, and this suggests that perhaps we are getting ready to move lower. We still like selling rallies, but it looks as if we may not get that chance. A break below the bottom of the hammer from the previous week has us selling as it shows the market winding up making another move down. 

Natural Gas Forecast for the Week of March 26, 2012, Technical Analysis
Natural Gas Forecast for the Week of March 26, 2012, Technical Analysis

If Natural Gas, is Cheap, Environmentally Friendly, Easily Available.. Why Aren’t US Businesses Taking Advantage?

Natural gashas many qualities which make it a productive, comparatively clean, and  a cheap power source. There are nevertheless, environmental and questions of safety with its production and use.

Plenty of the areas that are being explored and developed for natural gas production are comparatively spotless and are badlands areas, and development of these areas have massive impacts on the area’s environment, wildlife, and human populations.

Burning natural gas for energy leads to much less emissions of almost all kinds of air contaminants and carbon-dioxide ( CO2 ) per unit of heat produced than coal or refined petrol products. About 117 pounds of CO2 are produced per million Btu equivalent of natural gas matched against over two hundred pounds of CO2 per million Btu of coal and over 160 pounds per million Btu of fuel oil.

 These clean burning properties have given to a rise in natural gas use for electricity generation and as a transport fuel for fleet automobiles in the US. Natural gas is formed up usually of methane, which is an especially strong greenhouse gas.

Some methane leaks into the atmosphere from coal mines, gas and oil wells, and natural gas storage tanks, pipelines, and processing plants. These leaks are the source of roughly twenty five percent of total U.S. Methane emissions, but only about three percent of total U.S. Emissions of greenhouse gases. The oil and natural gas industry attempts to forestall gas leaks, and where natural gas is produced but cannot be transported economically, it is “flared” or burned at well sites.

This is said to be more safe and better than releasing methane into the atmosphere because CO2 is not as powerful a greenhouse gas as methane. Natural gas costs are a result of market demand and supply. Due to limited possible choices for natural gas consumption or production in the short run, changes in supply or demand over a brief period frequently result in big movements in prices to bring demand and supply into balance. Factors on the supply side that will affect costs include adaptations in natural gas production, net imports, or storage levels.

Increases in supply have a tendency to pull costs down, while falls in supply have a tendency to push costs up. Factors on the demand side include business expansion, summer and winter weather, and oil costs. Higher demand tends to end up in elevated prices, while lower demand can cause lower costs.

The vast majority of the natural gas consumed in the United States comes from domestic production. Lower production can finish up in heavier costs, but those heavier costs, in turn, can finish up in increased drilling for natural gas and at last increased production. Tropical Tempest Katrina Over the Bahamas and East of Florida, Aug twenty-four, 2005 Hurricanes and other serious weather may have an effect on the supply of natural gas. As an example, in the summertime of 2005, hurricanes along the U.S. Gulf Coast caused equivalent to about 4% of U.S.

In 2010, pipeline imports amounted to almost 16% of total natural gas consumption. About 99% of the pipeline-imported natural gas came from Canada with the remainder from Mexico.

During cold months, home and commercial end users consume natural gas for heating, which places upward strain on costs.

If sudden or harsh weather happens, the effect on costs intensifies because supply is usually unable to respond fast to the short term increased level of demand. These aftermath of weather on natural gas costs might be increased if the natural gas transport system is operating at maximum capacity. Under these conditions, costs must increase enough to scale back the overall requirement for natural gas.

Temperatures can also have a repercussion on costs in the cooling season as many electrical power stations that are operated to meet air-con wants in the summertime are powered by natural gas. Hotter-than-normal temperatures can increase gas demand and push up costs. The supply picture is also influenced by the level of gas held in underground storage fields. Natural gas in storage is a critical supply part in the heating season that helps satisfy unexpected shifts in demand and supply, houses stable production rates, and supports pipeline operations and center services.

Natural Gas Weekly Fundamental Analysis March 26-30, 2012, Forecast

Introduction:  Natural gas is nevertheless a major commodity in its own right, which is used for everything from cooking food to heating houses during the winter. Natural Gas is growing much faster than either of its non-renewable fossil fuel competitors, oil and coal.

Do not miss the weekly U.S. gas inventories report. The figures are issued by the Energy Information Administration (EIA) every Thursday afternoon at 15:30 (released Friday at 15:30 if there was a U.S. bank holiday on Monday). Here’s a link to the latest EIA report. The main natural gas moving figure in there is the change in inventories from the previous week. When it comes to the gas inventories report, we’re talking about billions of cubic feet, Bcf for short.

When the actual change in inventories number is released, it is the deviation from the expected number that is really important. If the actual inventories figure shows a 24 Bcf rise when an 84 Bcf increase was expected, then that is actually positive for the price of natural gas. All else equal, the price of natural gas should rise after the release.

A barrel of oil has roughly 6 times the energy content of natural gas. If the fuels were perfect substitutes, oil prices would tend to be about 6 times natural gas prices. However, due to various market characteristics discussed briefly above and the ease of using oil, the price of oil has been following a pattern of 8-12 times that of natural gas. However that ratio has spiked dramatically since March 2009.

Analysis and Recommendation:

Natural Gas is trading below expectations. Inventories this week showed a much higher than expected stockpile with reduced use. Now that winter has ended there is little extra demand for NG. The hibernation range should be between 1.32-1.36 but this week saw NG trading as low as 2.2605 and it ended the week at 2.2690. During the week it hit a high of 2.3915.

The U.S. Energy Information Administration said in its weekly report that natural gas storage in the U.S. in the week ended March 16 rose by 11 billion cubic feet, after declining by 64 billion cubic feet in the preceding week. 

Analysts had expected U.S. natural gas storage to rise by 10 billion cubic feet. 

Inventories fell by 20 billion cubic feet in the same week a year earlier, while the five-year average change for the week is a decline of 17 billion cubic feet, according to U.S. Energy Department data.

It was the earliest seasonal increase in stored supplies since 2007.

Total U.S. natural gas storage stood at 2.380 trillion cubic feet as of last week. Stocks were 766 billion cubic feet higher than last year at this time and 835 billion cubic feet above the five-year average of 1.545 trillion cubic feet for this time of year.

Historical:

High      5.13 January 2011

Low       2.2080 March 13, 2012

 

Economic Events: (GMT)

WEEKLY

Natural Gas Fundamental Analysis March 26, 2012, Forecast

Analysis and Recommendations:

Natural Gas continues to find a level to sit at trading at 2.272 up +.003. With winter officially over and inventories higher then estimate, NG will remain on the bottom, our outlook has been and will remain between 2.32-2.36.

The U.S. Energy Information Administration said in its weekly report that natural gas storage in the U.S. in the week ended March 16 rose by 11 billion cubic feet, after declining by 64 billion cubic feet in the preceding week. 

Analysts had expected U.S. natural gas storage to rise by 10 billion cubic feet. 

Inventories fell by 20 billion cubic feet in the same week a year earlier, while the five-year average change for the week is a decline of 17 billion cubic feet, according to U.S. Energy Department data.

It was the earliest seasonal increase in stored supplies since 2007.

Economic Events: (GMT)

WEEKLY

Natural Gas Forecast March 23, 2012, Technical Analysis

The natural gas markets continued to fall on Thursday, even after it was announced that the market had burned through more than anticipated the previous week. The fact that the market can’t even rally in this light shows just how broken it really is. The $2.20 level below should still be supportive, and as a result we want to sell if we can break below it.

Rallies could be sold as well, as the trend is most decidedly in favor of selling. The $2.40, $2.60, $2.80, and $3 levels all offer excellent spots to sell on weakness. We simply cannot condone buying this contract at this point at the market has been so weak for so long.

Natural Gas Forecast March 23, 2012, Technical Analysis
Natural Gas Forecast March 23, 2012, Technical Analysis

Natural Gas Fundamental Analysis March 23, 2012, Forecast

Analysis and Recommendations:

Natural Gas continues to decline, dropping to 2.268 from 2.349 after the EIA weekly inventory report.

The U.S. Energy Information Administration said in its weekly report that natural gas storage in the U.S. in the week ended March 16 rose by 11 billion cubic feet, after declining by 64 billion cubic feet in the preceding week. 

Analysts had expected U.S. natural gas storage to rise by 10 billion cubic feet. 

Inventories fell by 20 billion cubic feet in the same week a year earlier, while the five-year average change for the week is a decline of 17 billion cubic feet, according to U.S. Energy Department data.

Winter officially ended this past Tuesday and with higher than expected inventories, Gas will continue to bottom out and then hibernate till next winter.

Economic Events: (GMT)

WEEKLY

 

Natural Gas Forecast March 22, 2012, Technical Analysis

 

The natural gas markets had a slightly bullish and supportive day as the $2.40 level has held. It should be noted that we moved forward to the May contract at this point, and as such the levels are going to be slightly different.

The $2.60 level above looks resistive, as does the $3 level. We are sellers of this market only, and will continue to be going forward. We like the idea of selling rallies that show weakness at these levels, and as such will simply wait to add to our positions.

Natural Gas Forecast March 22, 2012, Technical Analysis
Natural Gas Forecast March 22, 2012, Technical Analysis