Posted on 03/11/2025 7:34:56 AM PDT by Miami Rebel
Technical indicators suggest some difficulty for natural gas futures in maintaining upside momentum amid a lack of near-term fundamental support. But longer-range fundamentals, including lagging production and rising LNG exports, point to an extended bullish trend.
The April natural gas futures contract jumped overnight to a $4.901/MMBtu high before backing off to settle the week’s opening session 9.2 cents higher at $4.491
“Prompt month natural gas futures showed a bit of flash Sunday evening by gapping slightly higher at the open then flirting ever so briefly with the $5.00 mark before plummeting back toward the bottom of that gap,” said NGI’s Patrick Rau, senior vice president of research and analysis.
Rau noted that April futures opened Monday 4.1 cents above Friday’s high, creating a chart gap. “Then, much like a cyclist that tries to break away from the pack only to be swallowed up by the peloton moments later, April surged to $4.901 within the first ten minutes of trading before quickly falling back below $4.50.”
However, a long-term double top formation on the charts in the $4.700-4.730 range, in place since early September 2022, was held. That “continues to serve as important resistance for the prompt month,” Rau said. Follow-on resistance exists at the $4.901 failed high, and psychological resistance at $5.000.
Meanwhile, immediate support for April now stands at $4.426, which would fill the chart gap created before the Monday opening. Additionally, the quick price surge overnight Sunday firmed up support at the $4 level, as it “effectively shifted Fibonacci retracement levels higher,” Rau said.
Traders use Fibonacci retracement levels to help them find key price levels and zones where natural gas futures might stall, reverse, or continue moving within a trend. Key percentages include 23.6%, 38.2%, 50%, 61.8%, and 78.6%.
Rau said, “Key 38.2% retracement now exists at $3.984, up from $3.875, effectively making $4.00 a bit of a stronger support level.” The middle of the current 20 day-Bollinger Band, which sits at $4.01, also suggests strengthened support at that level.
The Bollinger Band is another market indicator that measures market volatility and provides insights into potential price directions. April has not fallen below the middle of that curve since February 7.
Speculators appeared to be betting on higher prices, adding to their net long positions last week, according to the Commodity Futures Trading Commission Commitments of Traders report.
EBW Analytics Group senior analyst Eli Rubin said Friday’s report pointed to a 23,000 increase in natural gas speculator net long positions. Longs gained 30,000 contracts while shorts added 6,000 positions, Rubin said.
But Rau warned that technical indicators, including the relative strength index, which measures the speed and change of price movements, and slow stochastic, which compares the closing price to its price range over a certain period, “are flashing overbought signals” for April.
That could “thwart any continued short-term momentum, absent any fundamental news,” Rau said.
Fundamentally, weather forecasts have been increasingly warmer. Both the American and European weather models lost more than 25 heating degree days late last week through Monday, according to NatGasWeather.
However, producers continue to exercise restraint. According to Wood Mackenzie analysts, production has hovered around 105 Bcf/d over the recent seven days.
“While volumes are flowing at a surplus to year-ago levels, we have not seen output push to new highs even as the forward curve has rallied considerably,” Pinebrook Energy Advisors’ managing partner Andy Huenefeld said.
At the same time, feed gas flows to LNG facilities have been holding near 16 Bcf/d, according to Wood Mackenzie.
“Until the market starts to see a stronger indication that more supply is on the way to meet LNG export demand and help refill storage inventories, the path of least resistance appears to be to the upside,” Huenefeld said.
Natural gas appears “in the early innings of a long-term bullish cycle” as the “long-term fundamental outlook suggests demand poised to overwhelm supply,” Rubin said.
Too bad we burn it to generate electricity when we have plenty of lignite to burn but won’t.
Their analysis does not discuss the impact of the Trump administration’s reducing (or eliminating) price supports for “green” energy projects. NG is needed to provide backup power to wind and solar, but if wind and solar cease being economic, then NG will have to take up the power generation shortfall. That would last a decade or more until new nuclear plants come on line.
Doubtful. The industry will just pick up rigs. We will have a surplus of natural gas for decades. Oil, on the other hand….
Yep, we need to use Nat Gas for peaking and coal for base load.
The problem with all of the lignite mines in Texas is that they have already stripped all of the “easy” stuff and now they must dig deeper, which costs more. Also, they have to reclaim the land. It is cheaper to bring in bituminous coal from Utah and Wyoming. Watch the coal trains come down from Amarillo.
>> Yep, we need to use Nat Gas for peaking and coal for base load.
And for making fertilizer! And liquify it and export it.
There is a leftist war against fertilizer and thus food production.
Like every other gas price spike, I pray this is not just another bubble that will last a month or two and then go away. South Texas has been depressed since the early 80’s when gas went from $5.00 mcf to less than $2.00.
There are vast numbers of gas prospects that have never been drilled because prices wouldn’t support it. Small towns built on drilling, production and oilfield services have dried up and are now ghost towns.
If a bull market in gas materializes, it will be an answer to many prayers.
My mineral rights checks from gas wells have quadrupled and the future looks so good I’ve got to wear shades. Sitting on some Chevron and have held ET (7% dividend) for 5 years now. Go gas.
You are right. There is still a lot of gas to be found in South Texas but not at $2.25 an MCF. Sadly, not much oil until you get up to the Eagle Ford Play.
Where are your wells?
Just south of Arlington, Texas. Been producing for about 16 years. The larger one was re-frac’ed and production level really took off again.
EPD since its IPO. Spoke with Dan Duncan shortly thereafter when the stock was foundering: I bought more as a consequence! VTS, SBO, TRGP, and WMB too.
I like EPD, had it years ago, shouldn’t have sold it.
>> There is a leftist war against fertilizer and thus food production.
Yeah, because when we eat, we fart, each time subtracting nanoseconds from the viability of all life on earth. And don’t even get me started about the greenhouse effect of natural gas!
I can’t envision what could possibly go wrong with their plan to war against food production. ;-)
>> Sitting on some Chevron and have held ET (7% dividend) for 5 years now.
I like ET too. AND their CEO!
Yea, many of the older Barnett Shale wells can be refraced as they weren’t quite as robust as the wells after 2010 or so. You have to be able to run a liner inside the old casing and cement it in place. The poor boy way is to just drop a bunch of balls to divert from the perforations of the old frac.
Interesting, thanks.
Yeah, the company is less of a swashbuckler now. Leadership seems to understand where the sweet spot is.
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