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.

Natural Gas Weekly Fundamental Analysis Jan. 23-27, 2012, Forecast

Economic Events: (GMT)

These are the significant reports this week in the US. See daily forecasts for more detail

Jan. 25

19:15 USD Interest Rate Decision

19:15 USD FOMC Statement

Jan. 26

13:30  USD Core Durable Goods Orders (MoM)

13:30 USD Initial Jobless Claims

15:00 USD New Home Sales

Jan. 27

13:30 USD GDP (QoQ)

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.

Analysis:

There is no story or trade here, unless you think Natural Gas has bottomed.

Last weeks inventory remained as forecast and the weatherman continues to predict a mild winter, this the warmest winter in the last 100 years, only 4 winters in that period have been recorded warmed.

With the days drawing quickly by, Natual Gas will continue to remain at the bottom, but no one knows the actual bottom. This historical low was at 2.28. which was hit on Friday and Natural Gas was trading at 2.3920, perhap it was a good buy, we will have to see what happens Monday

After dropping all week Natural Gas made an upswing on Friday as investors took a chance of a cheap buy. We will have wait and see.

Natural Gas Forecast for the Week of January 23, 2012, Technical Analysis

Natural Gas markets continue to fall this previous week, and there is absolutely no sign of support anywhere. Quite frankly, markets like this don’t happen very often, but when they do, the bottom is something that takes a long time to form. The signs simply are not there now.

Going forward, selling is the only thing that can be done. The rallies are to be sold, and selling new lows, something we normally do, will be almost impossible to do as the move is much oversold at this point. The potential pain of a bounce going against you could be a reason to wait for the pullback to sell form higher levels at this point. $3 is now thought of as massive resistance.

Natural Gas Forecast for the Week of January 23, 2012, Technical Analysis
Natural Gas Forecast for the Week of January 23, 2012, Technical Analysis

Natural Gas Forecast January 23, 2012, Technical Analysis

Natural gas actually managed a bit of a bounce for the session on Friday, something it hasn’t done much of lately. The fall has been strong, and this bounce seems fairly small. The market is one you will want to sell rallies in, but this move isn’t enough by itself to get us to sell. The bounce should be a bit higher, and we are waiting to see if the market can gain another 20 cents or so in order to sell weakness. Buying isn’t doable in this market at all. The market is sell only at this point, and the higher it bounces, the more we want to sell. $3 should be the upper part of the range now.

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

Natural Gas Fundamental Analysis Jan. 23, 2012, Forecast

Economic Events: (GMT)

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Analysis and Recommendations:

Natural Gas continues to decline to its lowest price since 2002 except for some reason it moved up just a tad today trading at 2.361  up +0.038(+1.66%). The only explaination is that investors feel that it has bottomed out and is a cheap buy at the moment.

This has been the warmest winter in last decade, a report online said that in the last 117 years there have only been 4 warmer Decembers.

Perhaps this is a good buy.

Natural Gas Forecast Jan. 23, 2012, Fundamental Analysis

Natural gas prices rose on Friday from a 10-year low even as forecasts for milder weather signaled weak demand for the heating fuel into February.

Traders will continue to focus on weather developments, where weather forecasts suggest temperatures will be likely lower than average over the coming period, and that could put natural gas between gains and losses in next period.

Natural Gas Forecast Jan. 23-27, 2012, Fundamental Analysis

Natural Gas Forecast Jan. 23-27, 2012, Fundamental Analysis
Natural Gas Forecast Jan. 23-27, 2012, Fundamental Analysis
Natural gas prices fell last week, as warmer than expected weather conditions boosted speculations of falling demand for natural gas as a heating fuel. While the EIA report showed natural gas inventories decreased by 87 billion cubic feet, above estimates of a decrease by 85 billion cubic feet. Nonetheless, natural gas prices finished the week lower despite rising on Thursday.

Traders will be focused on the weather forecasts, where warm weather conditions are expected to weigh down on demand for natural gas, and that could push prices lower, since demand for the heating fuel would decrease as a result.

Highlights for this week that will probably affect the Natural Gas direction are:

Thursday December 26:

At 15:30 GMT, The EIA will release the weekly natural gas storage change for the week ending January 20, where the prior report showed that natural gas inventories decreased by 87 billion cubic feet.

Natural Gas Fundamental Analysis Jan.20, 2012, Forecast

Economic Events: (GMT)

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Analysis and Recommendations:

Natural Gas continues to decline to its lowest price since 2002. Todays inventory data showed that stocks declined at a minimal rate, pushing gas down by 38% in early morning trades. The U.S. Energy Information Administration said in its weekly report that natural gas storage in the U.S. in the week ended January 13 fell by 87 billion cubic feet, after declining by 95 billion cubic feet in the preceding week. As the weather remains warm and winter is ticking away the stock piles of gas are driving the prices down.

Total U.S. natural gas storage came in at 3.290 trillion cubic feet as of last week. Stockpiles  were 539 billion cubic feet higher than last year at this time. Natural Gas will continue to decline until it has hit a botton and will most likely sit there for a long time, unless a cold spell breaks.

Natural Gas Forecast Jan. 20, 2012, Fundamental Analysis

Natural gas prices traded near 11-year low on Thursday, as forecasts for warmer-than-normal Midwest weather signaled decreased demand for heating fuel.

Traders will continue to focus on weather developments, where weather forecasts suggest temperatures will be likely lower than average over the coming period, and that could put natural gas between gains and losses in next period.

Natural Gas Forecast January 19, 2012, Technical Analysis

The natural gas markets had a fairly quiet session on Wednesday as the market tries to digest the massive fall that we have seen over the last week or so. When a market falls like this, there is almost always a bounce sooner or later, as people will sometimes be quick to keep those massive gains.

The supply is far too much for the demand, and this should continue. The fall might see a nice pullback, but we are selling all rallies in this market until proven otherwise. As far as buying, we wouldn’t even seriously consider it until we get above $4, which is a long way away from here.

We are selling rallies, but may hold off on new lows as this fall needs to pullback in order to be healthy.

Natural Gas Forecast January 19, 2012, Technical Analysis
Natural Gas Forecast January 19, 2012, Technical Analysis

Natural Gas Forecast Jan. 19, 2012, Fundamental Analysis

Natural gas prices traded on Wednesday near a 10-year low even as forecasts for colder-than-normal Midwest weather signaled increased demand for heating fuel.

Traders will continue to focus on weather developments, where weather forecasts suggest temperatures will be likely lower than average over the coming period, and that could put natural gas between gains and losses in next period.

Natural Gas Fundamental Analysis Jan. 19, 2012, Forecast

Economic Events: (GMT)

15:30 USD Natural Gas Storage -95.00B

The Energy Information Administration (EIA) Natural Gas Storage report measures the change in the number of cubic feet of natural gas held in underground storage during the past week.

While this is a U.S. indicator it tends to have a greater impact on the Canadian dollar, due to Canada’s sizable energy sector.

16:00 USD Crude Oil Inventories 5.00M

The Energy Information Administration’s (EIA) Crude Oil Inventories measures the weekly change in the number of barrels of commercial crude oil held by US firms. The level of inventories influences the price of petroleum products, which can have an impact on inflation.

 16:00 USD Gasoline Inventories 3.60M    

Gasoline Inventories measures the change in the number of barrels of commercial gasoline held in inventory by commercial firms during the reported week. The data influences the price of gasoline products which affects inflation.

The data has no consistent effect, there are both inflationary and growth implications.

Analysis and Recommendations:

Natural Gas continues to fall as the days left of winter begin to wane. Weather is still the major factor here. The weather picture continues to call for a warm winter and the glut of natural gas grows. Tomorrow’s natual gas inventory should push the price down farther. Natual Gas is down, trading at 2.51 from yesterday’s close at 2.53.

Natural Gas Forecast January 18, 2012, Technical Analysis

Tuesday saw the natural gas markets fall yet again. This market is now entering a freefall, and although there will certainly be some kind of bounce, the ferocity of the downtrend simply cannot be risked in some kind of bottom fishing. However, you can be assured that there will be someone out there willing to buy this contract – but it won’t be us. In fact, we are looking for those bounces to sell as this market is completely broken. Now that we are under the $2.50 mark, a bounce really is overdue. However, we cannot simply buy based upon what the market “should” do, and as a result we will simply sell every time this market rallies 10 – 15 cents.

Natural Gas Forecast January 18, 2012, Technical Analysis
Natural Gas Forecast January 18, 2012, Technical Analysis

Natural Gas Forecast Jan. 18, 2012, Fundamental Analysis

Natural gas prices declined on Tuesday for the sixth day, reaching the lowest price in more than two years on speculations that milder weather will result in below-normal demand for the fuel through the end of the month.

Traders will continue to focus on weather developments, where weather forecasts suggest temperatures will be likely lower than average over the coming period, and that could put natural-gas/”>natural gas between gains and losses in next period.