Natural Gas Move Another Leg Lower Despite Inbound Cold

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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natural gas commodity weather

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. 

natural gas commodity weather

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. 

natural gas commodity weather

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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natural gas commodity weather

This came after our Afternoon Update yesterday where we similarly identified another short-term leg lower in prices. 

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natural gas commodity weather

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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natural gas commodity weather

Again today we saw the entire front of the natural gas strip decline. 

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natural gas commodity weather

Yet cold weather risks have allowed F/G to stay relatively firm in the face of significant selling. 

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natural gas commodity weather

 

Disclaimer: To begin receiving both our technical and fundamental analysis of the natural gas market on a daily basis, and view our various models breaking down weather by natural gas demand ...

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Louis Jackson 7 years ago Member's comment

I got in (and then quickly right back out) of UNG calls this morning. Natural gas may rip higher from here, but I could not stay in UNG once it made an all time low. UNG and UGAZ are two of the trickiest and most volatile instruments to trade IMO.