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Bearish Domestic Fundamentals Keeping Pressure on Natural Gas Futures Early

Natural gas futures extended their losses in early trading Tuesday, with prices skidding double digits amid a bearish outlook for October fundamentals. After stumbling 22.0 cents in the previous session, the November Nymex contract was down another 13.7 cents to $5.208/MMBtu at around 8:45 a.m. ET.

NGI Morning Natural Gas Price & Markets Coverage

The European and American weather models both lost degree days overnight by showing less cold reaching the northern part of the country late this week and next week, according to NatGasWeather. The pattern remained “solidly bearish” as each of the next 15 days was on track to deliver below-normal demand nationally, the firm said.

“We continue to look toward the end of October into the start of November for more intimidating cold shots into the northern U.S., although yesterday afternoon’s longer range” forecasts from the major weather models “failed to show any better prospects until mid-November,” NatGasWeather said. 

“With U.S. weather patterns favoring widespread comfortable highs of 60s to 80s the next several weeks, and with U.S. production up versus last week, this likely aided yesterday’s selling, along with softer global gas prices,” the firm added.

Along with weather models trending milder to give back some of the demand gains observed over the weekend, liquefied natural gas (LNG) feed gas demand was moving in the wrong direction for bulls, analysts at EBW Analytics Group told clients early Tuesday.

“Freeport LNG nominations slid 0.5 Bcf/d this morning, with weaker Gulf Coast spot demand offsetting the well-anticipated return of Cove Point in Maryland,” the EBW analysts said.

From a technical standpoint, the November contract was already testing a key support level at $5.21 in early trading, the analysts said.

“With a bearish near-term fundamental outlook extending through the end of October, if technical support fails, the November contract may soon be fighting just to stay above $5.00,” the EBW analysts said.

ICAP Technical Analysis pegged two “critical” support levels in the upper $4 range that the market could test should bulls fail to stop the bleeding.

“Still watching intently to see if the bulls can find their footing and turn things around,” ICAP analyst Brian LaRose told clients ahead of Tuesday’s session. “If they cannot, we would be prepared for a test of more critical support levels. Peg $4.947-4.921 and $4.806-4.803 as the two bands that must be decisively broken on a closing basis to label” the recent $6.466 high “as a more significant top tick for Henry Hub.”

November Nymex crude oil futures were off 25 cents to $80.27/bbl at around 8:45 a.m. ET.

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