Make it 8 of the last 9 days that the prompt March natural gas contract has settled lower. Warmer forecast trends through the week continually pressured the contract as traders looked for any type of floor for prices.
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The entire strip came under pressure today, with the front of the strip clearly selling off the most but most contracts logging significant losses.
Natural gas prices bounced right off the $2.58 support level that we highlighted to clients back on Monday was our low target for the week on warmer weather trends.
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Our Morning Text Message Alert then highlighted that $2.58 level, as our Morning Update did as well. Each day we reaffirmed that as our lower-end target, allowing our subscribers to effectively play the level today.
Post-settle natural gas prices have bounced right off that level, recovering some of their losses from the day heading into the weekend electronic close. This seems to emphasize the importance of this support, especially on the day where H/J flipped to contango.
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This is actually quite common for the time of year as forecasts warm and we price out any lingering winter premium, something we have been advising subscribers for awhile, since it requires sustained cold through February to keep H/J in backwardation. Even at current levels we remain a bit less in contango than most previous years.
The result of this H/J flip is a short-term natural gas strip that looks significantly different.
All of this was taken into account when in our Note of the Day (where we conduct our daily strip analysis mid-day) we explained that we saw the strip strengthening support at $2.58 and we could see a bounce off that level with any GWDD additions. A few GWDD additions on the afternoon European ensembles appeared to be all that was necessary to get a 3-4 cent bounce.
Attention next week will remain on the weather, as we try and determine heating demand levels for the second half of February and early March. Traders will also be looking along the strip for signs of when selling may end and where prices would be best valued for injection season; one indicator many will look at is that J/V declined to new lows today.
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All of these topics, from the latest weather forecasts and model trends, to strip and natural gas fundamental analysis, were contained in our Pre-Close Update, issued to all subscribers before the elect
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