The weather driven rally continued on Wednesday with natural gas futures closing higher for a fifth consecutive session. The price action also suggests that aggressive buyers are betting on a bullish storage report on Thursday.
December Natural Gas futures settled at $3.175, up 0.023 or +0.73%.
The market continued to be supported by forecasts for increased heating demand over the next two weeks. According to data from Platts Analytics’ Bentek Energy, U.S. heating demand hit an eight-month high of 86.9 Bcf/d last Monday and 89.6 Bcf/d last Tuesday.
Additionally, resilient power burn levels in both the Northeast and Midwest, where low cash prices and nuclear outages have kept gas economic compared with coal.
In other news, Thursday’s U.S. Energy Information Administration storage report is expected to show a build of 8 billion cubic feet (bcf) to 24 billion cubic feet for the week-ending November 3.
That compares with an increase of 54 bcf during the same week a year earlier and the five-year average of 45 bcf for the period.
The report estimates have been all over the map this week so this can only mean to expect a volatile reaction to today’s EIA report. Natural gas prices could soar if the storage number is a single digit. We could see a mild rally if it comes in at 10 to 19. I think a storage number 20 or higher will give earlier buyers an excuse to book profits.
Watch the price action and read the order flow at $3.160 today. Trader reaction to this level will tell us if the buying is getting stronger, or if sellers are retaking control.
A sustained move over $3.160 could fuel a fast rally into the main top at $3.198. This is a potential trigger point for an acceleration to the upside with $3.353 the next major upside target.
A sustained move under $3.160 will signal the return of sellers. However, any selling pressure is likely to be labored because of potential support levels at $3.100, $3.065 and $3.024.