Yahoo Finance Natural Gas Price Fundamental Weekly Forecast – Prices Weakening Despite Evidence of Tightening Supply
Natural gas prices closed lower last week even though there is evidence of a tightening of natural gas stocks.
December Natural Gas futures settled at $3.113, down $0.047 or -1.49%.
In other news, according to the U.S. Energy Information Administration, domestic supplies of natural gas rose by 51 billion cubic feet for the week ended October 13. Traders were looking for a build of 59 billion cubic feet.
Total stocks now stand at 3.646 trillion cubic feet, down 179 billion cubic feet from a year ago, and 35 billion cubic feet below the five-year average, the government said.
Forecast
Working stocks have tightened significantly since the middle of March, when they stood almost 400 bcf above the average and the market appeared heavily oversupplied.
But since the injection season started at the beginning of April, stocks have risen by less than average in 19 out of 28 weeks, increasing by a total of 1,594 bcf compared with an average of 1,891 bcf.
The result is that the surplus has been steadily worked off and the market has now moved into a small deficit compared with the five-year average.
This news should be bullish for natural gas but prices are still hovering near yearly lows. Additionally, the calendar spread between futures prices for December 2017 and March 2018 has moved into contango, indicating the market is well supplied.
Fund managers are the least bullish in almost a year, with the ratio of long to short positions down to 1.76 from recent highs of 2.92 in September and 5.03 in May. This tells me that they are expecting low demand because of a mild winter.
Prices could continue to weaken if the weather continues to come in neither too hot nor too cold. We may see a few periodic spikes to the upside, but the longer-term forecasts suggests we’re in store for a third straight mild winter. This means that we’re not likely to see a prolonged rally unless there is a long-lingering cold spell.
The weekly chart indicates prices could plunge if $3.063 is taken out with conviction with $2.640 a potential downside target. Overtaking $3.194 will be the first sign of strength. Taking out $3.353 will change the main trend to up on the weekly chart.
This article was originally posted on FX Empire
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