Monday, January 30
The big question this week in regards to natural gas futures prices on the NYMEX is whether we are finally starting to put a bottom under this thing. Prices opened the week lower, initially gapping a couple pennies down overnight coming into Monday and this action included the low price of the week at $2.231. Things quickly turned around Monday morning as news came out that Chesapeake, a major producer, would be shutting in production due to low natural gas prices. Prices gained over 15% in about 4 hours, cresting $2.50. The rally continued for the next couple of days, trading up to the high price of the week at $2.803 early Thursday morning. Prices had retreated back to the low $2.60’s when the mid-morning storage report was released by the EIA and the withdrawal from storage of 192 bcf, while bullish in nature, only provided a brief spike as prices pulled back to the $2.55 area. The correction ended there as Friday’s trade brought the expiration of the February contract and a little more support with the final expiration price of $2.678. This represented a gain of $0.335 for the week on the prompt contract and the winter strip gained over $0.30 to end at $3.582. The fundamental factors driving prices are still in place, namely a continued warm winter and very strong production, although some folks are wondering how long the production will keep up at sub $3 prices. From a technical perspective, the leg down on Monday to a new low with a subsequent turn around to end higher on the day has the look of a reversal pattern. Whether this most recent bottom will truly be the one or not is hard to say, picking bottoms in this market has not been a good career move for traders since mid 2008. The new week starts with the freshly minted March prompt contract starting out in the low $2.70’s.
Posted by:Eli Auerbach