Natural Gas Forecast February 3, 2012, Technical Analysis

 

Natural gas markets got a nice bounce in the marketplace during the Thursday session as traders started a short covering rally. The main driver was US supply shrinking more than expected during the announcement. However, the historical average is well above historical norms, and more gas is found on an almost daily basis at this point.

The market is a “sell only” one, and as a result we are selling rallies. We are certainly going to sell this one, but we are going to wait for one of two levels to trigger weakness if we can. The $2.80-ish level turned prices around earlier in the week, and we think it could again. Also, if we get beyond that mark, we are willing to sell at $3 on any signs of weakness. We will not buy this market.

Natural Gas Forecast February 3, 2012, Technical Analysis
Natural Gas Forecast February 3, 2012, Technical Analysis

Natural Gas Fundamental Analysis February 3, 2012, Forecast

Economic Events: (GMT)

WEEKLY

 

Analysis and Recommendations:

Natural Gas shot up today to 2.5578 on surprising inventory reports. The U.S. Energy Information Administration stated in its weekly report that natural gas storage in the week ending January 27 fell by 132 billion cubic feet after falling 192 billion cubic feet the previous week. Despite this significant drop, inventories remain at their highest level ever for this time of year. Total U.S. natural gas storage stood at 3.098 trillion cubic feet as of last week. Although the report indicted inventories fell more than expected last week. 

Today, saw NG climb over 6%.

 

Natural Gas Forecast February 2, 2012, Technical Analysis

Natural gas fell yet again on Wednesday as the bears have stepped back into the markets. The inability of the recent pullback of drilling by Chesapeake and others to rally the markets certainly says everything you need to know: Natural gas cannot be bought in this environment, and there is little chance that will change soon.

The market is to be sold, and rallies are a great way in which to do so. A fresh low could also be a catalyst at this point in time, and as a result we will be watching for either event to happen. There is absolutely no scenario where we buy this contract.

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

Natural Gas Fundamental Analysis Feb. 2 , 2012, Forecast

Economic Events: (GMT)

WEEKLY

 

Analysis and Recommendations:

Natural Gas is continues to fall from todays open of 2.466 and is down to 2.412. Inventory reports today came in higher then expected showing a huge over supply of natural gas. Natural Gas jumped in a week from the low 2.35 to hight of 2.82 on news that Chesapeake Energy was suspending production. Followed by a long range weather forecast showing colder weather over the next two week.

NG is dropping back to find a bottom, as the days of winter turn to spring and little demand.

 

Natural Gas Forecast February 1, 2012, Technical Analysis

 

Natural gas markets fell on Tuesday as the bears stepped back into the market again. The rally recently has been rather strong, but stalled out after just a couple of sessions. If you watched the video for natural gas that we put out yesterday, you know that we were watching this recent consolidation for signals as to which way the market was about to go.

You also would know that the hope was a break to the downside, and this is exactly what we got as the market continues to sell off. The trend is just so strong to the downside; we were never going to be overly comfortable going counter trend and buying. The winter has been much warmer than usual in the northeastern United States which drives down the demand for natural gas in a large way. In fact, it is the end of January and 60 degrees Fahrenheit or 16 degrees Celsius in many parts of the region, a far cry from cold. For most of the month, it has only been a few degrees cooler.

The supply in this market is simply far too much for the demand to ever come close to consuming. The market for natural gas is going to be bearish for quite some time, and the fact that some large drillers are stepping away from production seems to be only a minor blip on the radar. In fact, if you trade stocks – you can expect a lot of consolidation in the industry as prices simply cannot support so many companies.

The large red candle at the end of the Tuesday session just puts an exclamation point on the bearishness of this market, and a break below the lows for the day is yet another sell signal if you missed the breakdown earlier on Tuesday. There isn’t a scenario where we can imagine buying this market, and as a result are selling rallies, and the above mentioned breakdown below the lows of the session. Until we see prices well above $4, we really aren’t interested in buying.

 

Natural Gas Forecast February 1, 2012, Technical Analysis
Natural Gas Forecast February 1, 2012, Technical Analysis

Natural Gas Fundamental Analysis Feb 1, 2012, Forecast

Economic Events: 

WEEKLY

                               

Analysis and Recommendations:

Natural Gas is currently down at 2.502 after hitting a high of 2.842. Today is a simple case of profit taking as NG has cascaded up for a week, moving from 2.32 to 2.84. Natural gas continues its steep losses on warming weather trends and profit-taking after some recent gains. Losses topped 8% and prices traded at their lowest in a week and a half.

Natural-gas prices have closely tracked weather forecasts in recent weeks. Colder-than-normal winter temperatures increase the need for gas-fired electricity to heat homes, bolstering demand for natural gas. This is typically the coldest time in winter, but temperatures in the U.S. have yet to reach levels cold enough to boost demand for the heating fuel, keeping prices depressed at unseasonably low levels. 

 

Natural Gas Forecast January 31, 2012, Technical Analysis

 

Natural gas markets fell on Monday as the market continues to try to price in extreme amounts of oversupply in this commodity. The winter continues to be mild in the northeastern United States, and warmer weather is on its way. Adding to this is the massive amounts of natural gas that has been found over the last twelve months, and you have a bit of a perfect storm when it comes to the falling market.

The markets did get a bit of a positive signal from a couple of gas drillers saying they are going to stop for the time being until prices can rise, but the mathematics are going to work against the bulls over time. With the winter well over half done, the market will struggle to deploy all of the excess overhang in inventory. With this in mind, the down trend should continue.

The $2.50 level looks to be supportive at this point, and this makes sense as it is a “round number” of sorts. The $2.85 has seen sellers come back into the market, and it has yet to see a serious challenge to the $3 mark. This fairly tight range we have seen over the last couple of sessions sets up a fairly straightforward trade for us.

On the break of the top of this range, one could try to aim for $3, but it is at that range that we believe the real battle will be. Because of this, buying a breakout to the upside, while technically correct, might be a bit risky at this point. However, a break of the $2.50 and daily close down there would signal that the bears are back in control – and we would be very happy to sell at that point in time as the trend has been so strong over the last year or so.

While we have two separate signals that could be triggered, quite frankly we prefer to sell as the trend will take control again sooner or later, and it has been a great one-way trade for some time now.

Natural Gas Forecast January 31, 2012, Technical Analysis
Natural Gas Forecast January 31, 2012, Technical Analysis

Natural Gas Fundamental Analysis Jan. 31, 2012, Forecast

Economic Events: (GMT)

WEEKLY

Analysis and Recommendations:

Natural Gas is currently down at 2.737 after hitting a high of 2.842. Today is a simple case of profit taking as NG has cascaded up for a week, moving from 2.32 to 2.84.

Prices rose in early trading and have maintained their current level industry weather group MDA EarthSat said Friday that it expected colder-than-normal weather throughout most of the U.S. east coast and southern states in the next 11-to-15 days.

Natural-gas prices have closely tracked weather forecasts in recent weeks. Colder-than-normal winter temperatures increase the need for gas-fired electricity to heat homes, bolstering demand for natural gas.

This is typically the coldest time in winter, but temperatures in the U.S. have yet to reach levels cold enough to boost demand for the heating fuel, keeping prices depressed at unseasonably low levels. 

Natural Gas Weekly Fundamental Analysis Jan. 30-Feb. 3, 2012, Forecast

Economic Events: (GMT)

WEEKLY

  Historical:

High      5.13 January 2011

Low       2.29 January 20, 2011

Rule:

Natural gas is sometimes said to be the queen of all commodities, with Crude Oil being king.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.

Trading natural gas is not for the faint hearted. Even by commodities standards, natural gas is a notoriously volatile market subject to wild price fluctuations.

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.

The average natural gas futures price for the upcoming winter is less than $4 per million British thermal units (MMBtu), the lowest level entering the winter since 2001-2002. The so-called “winter strip,” the average natural gas futures price for the contract months November through March as settled on the New York Mercantile Exchange (NYMEX), is a closely followed measure of market participants’ price expectations. In markets such as New England and California, where natural gas prices often set on-peak, wholesale power prices, the NYMEX winter strip for natural gas also can influence expectations for forward wholesale power prices.

Late October expectations for average winter natural gas prices have not been this low since the winter of 2001-2002. Winter price expectations, as reflected through the winter strip on NYMEX, peaked at almost $12 per MMBtu in 2005 in the aftermath of supply disruptions related to Hurricanes Katrina and Rita. Starting in 2009, late fall expectations for average winter natural gas futures prices dipped under $5 per MMBtu as domestic natural gas production from shale plays grew rapidly.

 

Analysis and Recommendation:

Natural Gas closed the week strong rallying to 2.68

Natural gas for February delivery  turned higher, up 7 cents, or 2.8%, at $2.68 per million British thermal units. That brought natural gas’s weekly gains to 14%, the first in three weeks and the largest weekly percentage gain since September 2009.

After reaching a bottom last week of 2.32, natural gas bleeped up, as buyers were jumping in figuring it had hit a bottom. The inflow of buyers pushed NG upwards and then profit taking started, but NG held its gains. Mid week, Chesapeake Energy announced it was cutting production until it was economically feasible to produce NG. The midweek energy report, showed ample inventory and the weather man said there would be no cold fronts moving in, but Natural Gas has continued to rise.

The U.S. Energy department cut its estimate for natural gas reserves in the Marcellus shale formation by 66%, citing improved information on supply. Elsewhere, Occidental Petroleum announced it will cut back on natural gas drilling due to the low prices and Conoco Phillips agreed by limiting North American natural gas production investments. 

These events should not have had an immediate effect on the markets but none the less they did. NG is still trading very low, even the Energy Admin had estimated the cost of NG this winter to be in the 3$ range.

Natural Gas Forecast for the Week of January 30, 2012, Technical Analysis

 

Natural gas had a strong week for the first time in ages. It is possible that the bottom is starting to be formed at this point, but the market will have to contend with the $3 level just above first. The candle was a bullish engulfing one, and as a result it technically is a buy signal if we break above it. However, with the significance of the large round number at $3, we are more comfortable to wait until that level gets closed above, perhaps on a weekly candle.

The trend is strongly to the downside, so we are much more comfortable selling if we get some kind of weak candle in the next week or two. However, until we get one of our signals – we are going to be flat in this market.

 

Natural Gas Forecast for the Week of January 30, 2012, Technical Analysis
Natural Gas Forecast for the Week of January 30, 2012, Technical Analysis

Natural Gas Forecast January 30, 2012, Technical Analysis

 

Natural gas markets rose again on Friday as the trading community continues to short cover in this market. The recent oversold condition in the market has lead many drillers to step away from production as it simply wasn’t profitable anymore. However, there is still a massive glut of the commodity, and the trend certainly hasn’t changed much.

The recent break of $3 was a significant event to us, and it has yet to be retested. This is a common event in technical analysis, and as a result we expect the level to offer resistance going forward. The market looks a bit bullish at the moment, so we will stand back and let it rise to $3 before we start looking for resistive candles.

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

Natural Gas Fundamental Analysis Jan. 30, 2012, Forecast

Economic Events: (GMT)

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Analysis and Recommendations:

Natural Gas continues to amaze, trading at 2.723 +0.069 (+2.60%)

After reaching a bottom last week of 2.32, natural gas bleeped up, as buyers were jumping in figuring it had hit a bottom. The inflow of buyers pushed NG upwards and then profit taking started, but NG held its gains. Mid week, Chesapeake Energy announced it was cutting production until it was economically feasible to produce NG. The midweek energy report, showed ample inventory and the weather man said there would be no cold fronts moving in, but Natural Gas has continued to rise.

The U.S. Energy department cut its estimate for natural gas reserves in the Marcellus shale formation by 66%, citing improved information on supply. Elsewhere, Occidental Petroleum announced it will cut back on natural gas drilling due to the low prices and Conoco Phillips agreed by limiting North American natural gas production investments. 

These events should not have had an immediate effect on the markets but none the less they did. NG is still trading very low, even the Energy Admin had estimated the cost of NG this winter to be in the 3$ range.

Natural Gas Forecast January 27, 2012, Technical Analysis

 

Natural gas markets fell during the session on Thursday as the recent rally has run out of steam. This is the action that we suspected would be coming, but we haven’t got the great sell signal that we wanted yet. We are looking to sell this market closer to $3 if we are given the opportunity, and are willing to sell off of shorter time frame charts as well, when they look weak. We are not willing to buy at this point in time as the trend is still overwhelmingly to the downside.

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

Natural Gas Fundamental Analysis Jan. 27, 2012, Forecast

Economic Events: (GMT)

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Analysis and Recommendations:

Natural Gas is down trading at 2.615  -0.153 (-5.54%)

The U.S. Energy Information Administration reported that natural gas storage in the U.S. in the week ended January 20 fell by 192 billion cubic feet, after declining by 87 billion cubic feet in the preceding week. Analysts had expected U.S. natural gas storage to drop by 175 billion cubic feet. 

Inventories fell by 184 billion cubic feet in the same week a year earlier, while the five-year average change for the week is a decline of 173 billion cubic feet, according to U.S. Energy Department data.

Earlier this week the second largest producer of natural gas, Chesapeake Energy, said they were going to stop production until it was more economically feasible. This drop in production gave NG a boost up and it climbed from a bottom of 2.32 to a high of 2.83, when investors began selling off to take profits.

The USD also plunged today after remarks from the FOMC and the Federal Reserve Director. All commodities and equities soared as the USD dropped.

Natural Gas Forecast January 26, 2012, Technical Analysis

Natural gas markets continued to rise during the Wednesday session as the short covering keeps going. The market broke above the shooting star that was formed on Tuesday, and with more companies talking of taking their drilling offline, the market only had one way to go. The market has been extremely oversold recently, and this bounce is exactly what was needed. We are still waiting, and will be very interested in selling in the $3 area if we get resistive candles. We are still leery of buying this contract as the supply will still be far too great.

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

Natural Gas Fundamental Analysis Jan. 26, 2012, Forecast

Economic Events: (GMT)

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Analysis and Recommendations:

Natural Gas soared to 2.737 extending gains. It has been a meteoric rise from last weeks bottom of 2.32.

Gas prices have skyrocketed nearly 16% in the past three sessions after Chesapeake Energy announced on at the beginning of the week that it planned to reduce production levels in response to prices falling below “economically unattractive levels”.

There was also a lot of short-covering today driving up prices.

As the warm weather continues, the consumption of natual gas continues to decline and the winter grows closer to the end.

Natural Gas Forecast January 25, 2012, Technical Analysis

Natural gas markets gained again during the session on Tuesday, but pulled back in the US afternoon as the gap had been filled. The resulting candle is a shooting star, and with the severe downtrend, this should be a credible sell signal.

The bearish pressure will continue to be on this market, even with Chesapeake walking away from dry gas drilling. The abundance of natural gas should continue into the foreseeable future, and while the market cannot go down forever, the price of natural gas will be low going forward.

The gap that was filled is from the massive fall a week ago. The gap was filled, and then repelled prices in the $2.75 area. This is the first area we are looking for selling opportunities in this pair as we simply will not buy this market, but the reality is that is an oversold market. In a market like this, you simply have to expect some kind of bounce sooner or later. As long as that is the case, we are willing to sell, but only after rallies like we saw the previous session. With that in mind, we like the idea of selling the market if we manage to break the bottom of the Tuesday range.

Going forward, if this area gets broken to the upside, we would continue to look for weakness in the $3 area, as well as $3.25 and $3.50 levels. The market is a “sell only” one, no matter what kind of move we saw on Monday. The bearishness is a cyclical one, and one major driller stepping out of the situation while certainly bullish for price – isn’t nearly enough to push the overall market higher. There is simply far too much gas and the winter has been far too mild for demand to make up the slack in the market.

We are selling a break below the bottom of the Tuesday range, and would aim for at least the lows again, and if we do not get that breakdown, we are willing to be patient and wait for the resistance areas mentioned above from which to try to sell again later.

Natural Gas Forecast January 25,, 2012, Technical Analysis
Natural Gas Forecast January 25,, 2012, Technical Analysis

Natural Gas Fundamental Analysis Jan. 25, 2012, Forecast

Economic Events: (GMT)

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Analysis and Recommendations:

Natural Gas opened this Tuesday at 2.651 and rallied early in the day hitting a high of 2.703 and decling to close the day at 2.587 below the open. There was a huge rally of buyers jumping into the market on yesterdays news that Chesapeake Energy had cut their production quota for 2012 until it was more economically feasible to produce. This news brought on a rally from 2.32 to the high today of 2.703, when investors who bought several days ago and the bottom were able to sell of for profits, well done.

Weather patterns still hold and the unseasonably warm winter is coming to a close. Natural Gas will most likely fall back to the bottom of last week of 2.32 as the rally fades.

Natural Gas Forecast January 24, 2012, Technical Analysis

The natural gas markets skyrocketed during the session on Monday as traders stepped in to trade this market. Chesapeake Energy announced that it was going to stop drilling for dry natural gas as the prices are far too low to make the business profitable. With that in mind, roughly 9% of the gas drilled in the United States will suddenly stop production.

This could be the start of something bigger, but will take more companies doing the same at this point. While the move was massive, it still is far below the trend lines that we can put on the chart. And while this is bullish for natural gas in general, it won’t be enough to make up the difference as the winter is over half completed, and the most profitable season for natural gas has already been an unmitigated disaster this year.

The chart shows several different levels that will act as resistance, and although the move was on massive volume, the trend will be very difficult to change for good. The move could be violent and explosive, but buying still is a bit risky for us at this point. For starters, you would have to know what the “fair value” of 91% of the gas in the United States would place the market at. Also, there are plenty of areas around the world that are finding gas reserves, and the Gulf of Mexico is about to start churning out quantities as well. The market is still awash in gas, and this won’t change even with the move by Chesapeake on Monday.

Looking at the levels we are watching, $3 seems to be the most significant at this point in time. The area saw decent support and there is no reason to think that it won’t act as decent resistance. The other areas we are looking at include $2.75, $3.50 and of course $4. We are presently waiting for a weak candle in one of those areas to sell. We are not willing to buy, even though the bounce could continue for the short term.

Natural Gas Forecast January 24, 2012, Technical Analysis
Natural Gas Forecast January 24, 2012, Technical Analysis

Natural Gas Fundamental Analysis Jan. 24, 2012, Forecast

Economic Events: (GMT)

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Analysis and Recommendations:

Natural Gas is the surprise of the day, at 2.5860 it is up 8.07%, this is the second day of increases after hitting the bottom on Thursday 2.32.

Chesapeake Energy announced a planned product cut until demand and prices had increased to make it economically profitable to produce.

Along with Crude Oil all commodities move up today and the weakness in the USD.

The high inventory and low price has been brought on the mild winter and the predictions of an early spring.

Natural Gas should reach a plateau and sit there. Most likely it has topped out its asking price for the rest of the season unless an unexpected cold front sets in.