NATGAS launched today's session with a 7% bullish price gap, however sellers managed to erase half ot the upward wave. Last week, US gas price tested major support at $3 per mmbtu and one should expect much larger inventories decline in the coming weeks. Theoretically demand may also increase as temperatures in the United States are expected to fall besides Florida and Texas.
Higher temperatures are expected to persist in the Southeastern states, but the Midwest and the north part of the East Coast are crucial when it comes to heating conditions. Source: Bloomberg
The last EIA demand and supply report (ending January 18) showed that the all-time record of daily gas consumption occurred on December 23 due to the winter attack in the US. Later on consumption decreased quite rapidly and fell below average and was definitely lower compared to last year. Production remains consistently above 100 bcf/d, which also puts downward pressure on gas prices in the medium term.
Gas consumption may increase in the near future, taking into account the lower temperatures in the US. Source: EIA
The price opens with a 7% gap, but half of that move is neutralized. The rebound on the chart looks rather unimpressive, however the price bounced off the key support zone around $3/MMBTU, which provides some hope for the bulls. On the other hand, speculators continued to increase their positions on futures. Seasonality points that a local low was reached at the end of last week and upward correction could be launched. The next EIA inventory report on Thursday will show whether lower temperatures increased gas consumption.
Increased gas consumption could push the price towards resistance zone around $3.5-3.7/MMBTU. Source: xStation5
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