Natural gas prices fell sharply today, losing 2.4%, as the contract for March settlement on the New York Mercantile Exchange settled at $2.85/MMBtu.
The impetus behind today’s decline was a smaller than expected draw in natural gas inventories. Natural gas inventory showed a draw of 114 Billion Cubic feet (Bcf) versus expectations for inventory to be a draw of approximately 130 Bcf, according to the latest report from the US Energy Information Administration (EIA) for the week ending February 10, 2017.
Working gas in storage was 2,445 Bcf as of Friday, February 10, 2017, according to EIA estimates. Stocks were 303 Bcf less than last year at this time, and 87 Bcf above the 5-year average of 2,358 Bcf. At 2,445 Bcf, total working gas is still within the five-year historical range.
Mild weather across the US has also been a weight on natural gas prices in recent weeks. According to natgasweather.com, chilly temperatures will linger over the Northeast today in the wake of yesterday’s cold blast as highs only reach the 30’s. However, the rest of the US will be mostly mild and dry with 50’s to 70’s over the central US and southern US, which is well above normal for mid-February. The West Coast will see another round of heavy Pacific storms, although with fairly high snow levels. Warm high pressure will gain ground over all but the West this weekend into next week with very light natural gas demand as temperatures run 15-30°F warmer than normal.
The fact that natural gas prices extended their move to the downside in today’s session in the presence of a persistent oversold condition is a sign of weakness and the current target remains at the November reaction low at $2.764, the next important support level on the daily chart.
On the upside, resistance is at the gap created as a result of Monday’s sell-off. That gap is from $2.994-$3.005. A sustained move back above this level is currently not expected merely in reaction to an oversold condition.