Natural gas prices dropped another 2.5% today as they continued to encounter heavy selling from slightly easing cold weather forecasts and elevated production levels. The prompt month January contract bounced right off a $2.88 support level we had been watching, closing a few cents off the lows.
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This came as cash prices were a bit more firm, declining just a few cents on the day as cold began moving in across the country.
Selling today was not quite as much of a surprise, however, as we saw overnight weather trends as bearish enough to pull prices a leg lower. We warned clients about a bit more downside this morning, and natural gas prices fell right into our support level from $2.88-$2.92.
This combined with elevated production and lackluster demand in the face of significant warm the past week and a half to push the natural gas strip lower, something we noted in our Note of the Day to clients yesterday morning.
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This came after our Afternoon Update yesterday where we similarly identified another short-term leg lower in prices.
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Meanwhile, in our Morning Update this morning we showed how even contracts out in 2019 took a significant beating amidst a loosening balance the last couple of trading days, indicating early week selling was more not primarily weather-driven.
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Again today we saw the entire front of the natural gas strip decline.
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Yet cold weather risks have allowed F/G to stay relatively firm in the face of significant selling.
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