Natural Gas Prices Break Above Resistance, Positioning Bias Cap Gains

Natural gas prices were able to break above resistance on Monday with support from hopes that colder weather conditions would help support prices.

The latest Baker Hughes data recorded an increase in gas rigs to 157 in the week ending March 17th from 151 previously and compared with 89 in the same week of 2016 which maintained concerns surrounding rising gas production over the next few months.

The latest COT positioning data recorded an increase in long natural gas positions to over 480,000 while short positions were cut to near 175,000 with the net long position above 300,000 and close to 12-month highs. The positioning bias will maintain the risk of sharp liquidation if prices dip below key support levels.

The dollar was unable to gain any significant traction on Monday with USD/JPY held below the 113.00 resistance area and the subdued US tone helped underpin natural gas prices.

Developments surrounding the oil complex were less favourable, however, with WTI testing 3-month lows below $48.00 p/b before a slight rally.

Natural gas found robust support on approach to the $2.90 per mBtu level and rallied firmly during early US trading on Monday with a break above the $3.00 resistance level.

Latest weather forecasts provided limited support to prices with expectations of a sharp dip in temperatures across the Great Lakes and Eastern US regions in midweek, although temperatures are then expected to move significantly higher which would cap gas demand.

There was also increased optimism surrounding potential natural gas exports to Mexico. The latest thrust of the US Administration on trade appears to be more conciliatory surrounding Mexico and Canada. This has underpinned confidence in natural gas exports to Mexico.

Overall, April futures consolidated just above $3.01 per mBtu during the New York session.

Tim is a contributing author to EconomicCalendar.com. He is an economist and has been involved in financial markets for over 20 years as an analyst. He specialises in global economic trends, macro policy and central banks. Extensive knowledge, experience and data mining is used to anticipate trends in equities, bonds and forex with a contrarian slant. He is a graduate of the University of York with a degree in Economics/Econometrics.