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March 22 Natural Gas Update
Natural gas prices are slightly higher this morning by $0.015 in the April wholesale exchange contract. After almost 2 weeks of painfully slow markets, natural gas came alive yesterday driven by a smaller than expected draw in the EIA storage number. Estimates ranged from a draw of 23 Bcf to a draw of 32 Bcf so when the actual storage change came out at a draw of 11 Bcf, the natural gas market wasted no time pushing lower and blowing through $4.25 support all the way down to almost $4.05. We bounced slightly in the after noon but it was weak at best leading us to believe that there is definitely more room to the downside. The question now is how much. Next week's storage estimates are already calling for builds and we are only half way through March. Volume was high at well over 300,000 lots on the NYMEX floor and electronic trading. Some folks are calling for a break or test of $4.00 today or possibly a bounce heading lower next week.
It seems that the natural gas market is doing its job in disincentivizing producers of shale gas by drilling for too much natural gas by working the price of natural gas lower. Aren't the markets great from an incentive standpoint, they give you all clues of what is either anticipated or foreseen down the road that will be affecting the market.