US natural gas prices (NATGAS) launch a new week with a big bearish price gap, following a test of $3.00 per MMBTu area on Friday. It should be noted that, omitting contract rollovers, US natural gas prices climbed almost 50% off the local low from February.
Occurrence of the bearish price gap today is somewhat interesting. New set of forecasts for the United States points to below-average temperatures in key US heating regions in the coming days. Peak cold weather may occur in mid-March. On the other hand, temperatures are rising relatively as the end of winter nears. Nevertheless, one may expect US gas consumption to be elevated in the next 2 weeks.
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Create account Try a demo Download mobile app Download mobile appHowever, it may not lead to a steep drop in gas stockpiles. Why? US natural gas production continues at elevated levels of 101-102 billion cubic feet per day. Those are levels that are a couple billion cubic feet higher than averages for the current period of the year so, even with resumption of Freeport LNG terminal operations, the impact of increased demand should be negligent. This raises concerns that period of oversupply will continue and, therefore, point of peak oversupply has not been reached yet. Nevertheless, new weather forecasts give high chance that today's bearish price gap will be filled and prices may climb to as high as $3.5 per MMBTu this month.
Temperatures are expected to drop all across the United States. Source: NOAA, Twitter
"Total oversupply" signal is not flashing yet. Source: Bloomberg, XTB
NATGAS launched today's trading with big bearish price gaps and declines deepened to around -10% afterwards. It is rare for NATGAS to experience a daily price decline bigger than 14-15% so should the price continue to drop, traders may look for an upward correction in the later part of the day. Source: xStation5
