In an EBW Analytics Group report sent to Rigzone by the EBW team on Tuesday, Eli Rubin, an energy analyst at the company, highlighted that the January natural gas contract “lifted off into final settlement yesterday”.
Rubin pointed out in the report that the contract added 32.1 cents, or seven percent, “in a volatile session spanning six different 15 cent price swings”. The EBW energy analyst noted that “bullish momentum carried February to test above $4.00 per million British thermal units (MMBtu) for the first time in three weeks, with technicals suggesting continued immediate term tailwinds for the new NYMEX front month”.
In the report, Rubin said the market “reacted strongly to the colder mid-January outlook”, adding that “DTN’s Week 3 forecast added six gHDDs over the past 24 hours” and that “other widely followed meteorologists are hinting at chances for more substantial cold to arrive into mid to late January”.
“The near term outlook, however, suggests today may be the coldest day for the next three weeks, with daily weather driven demand to recede 10.9 billion cubic feet per day over the next week,” Rubin went on to state in the report.
Rubin also warned in the EBW report that physical market weakness is likely over New Year’s into the weekend.
“Chances for weather models to turn colder may offer further fuel to the rebound rally, but – sans weather support – upside momentum for the February contract following a 42 cent per MMBtu (+12 percent) rally in the past week may soon be due for a pause,” he added.
In a separate EBW report sent to Rigzone by the EBW team on Monday, Rubin warned the January contract’s “volatile run as the NYMEX front-month may have a final chapter during today’s session, with weekend weather forecasts shedding 29 billion cubic feet of heating demand and chances for another surprise with this morning’s delayed Energy Information Administration report”.
“Consensus expectations for today’s storage report for the week ending December 19th range from 167-171 billion cubic feet, plunging gas inventories below five-year norms for the first time since April,” Rubin said in that report.
“However, the report’s delay (with the report for the week ending December 26th to be released Wednesday) and extremely mild late-December weather suggest impacts may be superseded by January contract expiry trading dynamics,” he added.
Rubin went on to state in this report that, “fundamentally”, EBW “retain[s] a modest medium term bullish bias with tight regional storage figures east of the Rockies, chances for another round of cold with a rebuilding Alaskan ridge, strong LNG, and likely drooping production into mid-winter”.
“A comparatively faint fundamental signal, however, may be swamped by technical noise and the latest weather forecasts amid a volatile la Nina pattern,” he added.
In its latest weekly natural gas storage report, which was released on December 29 and included data for the week ending December 19, the Energy Information Administration stated that working gas in storage was 3,413 billion cubic feet as of December 19, according to its estimates.
“This represents a net decrease of 166 billion cubic feet from the previous week,” the Energy Information Administration said in its report.
“Stocks were 129 billion cubic feet less than last year at this time and 24 billion cubic feet below the five-year average of 3,437 billion cubic feet. At 3,413 billion cubic feet, total working gas is within the five-year historical range,” it added.
In both of its reports, EBW predicted a “volatile pattern continues” trend for the NYMEX front-month natural gas contract price over the next 7-10 days and a “slightly higher” trend over the next 30-45 days.
To contact the author, email andreas.exarheas@rigzone.com
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