The November natural gas contract continued its breakout Tuesday, with the contract rallying over 2% again on the day and breaking through a number of upward resistance levels.
The rally was strongest at the front of the strip, with the December and January contracts contributing quite a bit but later contracts not quite as strong.
The February/March G/H spread we have been watching since it ballooned last January has continued higher on this rally.
In our Morning Update we highlighted that, "Models confirming long-range cold trends make a test of $3.15-$3.16 likely today" and "A break of $3.16 would bring $3.2" though we did not particularly expect a break of that level. Despite reversing off $3.15 initially this morning, stronger cash prices helped the November contract break through that resistance and move within several ticks of $3.2. Cash prices that have been very strong recently appeared to be the culprit.
Afternoon model guidance did slightly increase cold risks across the middle of the country again in the long-range too, though natural gas prices dipped a bit into the settle.
Before the morning bounce, in our intraday Note of the Day for clients we warned that we were seeing bullish signaling along the natural gas strip that indicated that morning selling was unlikely to be sustained.
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