Economic Events:
January 16:
US Markets are closed in observance of Martin Luther King Day
January 19:
At 15:30 GMT, The EIA will release the weekly natural gas storage change for the week. See comments below
Historical:
High 5.13 January 2011
Low 2.76 January 12, 2011
Support and Resistance Levels
- S1: 2.9790 S2: 2.9590 S3: 2.9410
- R1: 3.0170 R2: 3.0350 R3: 3.0550
Natural Gas Fundamental Analysis Forecast January 16-21,2012
Rule:
Natural gas is sometimes said to be the queen of all commodities, with Crude Oil being king.Natural gas is nevertheless a major commodity in its own right, which is used for everything from cooking food to heating houses during the winter. Natural Gas is growing much faster than either of its non-renewable fossil fuel competitors, oil and coal.
Trading natural gas is not for the faint hearted. Even by commodities standards, natural gas is a notoriously volatile market subject to wild price fluctuations.
Do not miss the weekly U.S. gas inventories report. The figures are issued by the Energy Information Administration(EIA) every Thursday afternoon at 15:30 (released Friday at 15:30 if there was a U.S. bank holiday on Monday). Here’s a link to the latest EIA report. The main natural gas moving figure in there is the change in inventories from the previous week. When it comes to the gas inventories report, we’re talking about billions of cubic feet, Bcf for short.
When the actual change in inventories number is released, it is the deviation from the expected number that is really important. If the actual inventories figure shows a 24 Bcf rise when an 84 Bcf increase was expected, then that is actually positive for the price of natural gas. All else equal, the price of natural gas should rise after the release.
A barrel of oil has roughly 6 times the energy content of natural gas. If the fuels were perfect substitutes, oil prices would tend to be about 6 times natural gas prices. However, due to various market characteristics discussed briefly above and the ease of using oil, the price of oil has been following a pattern of 8-12 times that of natural gas. However that ratio has spiked dramatically since March 2009.
Analysis:
Mild winter temperatures and steadily rising natural gas production extended this week’s natural gas price drop to $2.72 per 1,000 cubic feet in early trading.
Plummetting by 5.7 percent or 17 cents on Wednesday, natural gas prices are their lowest point in at least two years, and with natural gas production ratcheting up across the country, the fuel’s price does not look like its headed up anytime soon.
Last week some forecasts suggested much colder weather was coming in, and now this week those forecasts have backed off. That’s triggering prices to fall further. We knew this month was going to start of very mild, but now we’re seeing a return to mild weather until the end of the month, and that’s helping the market dig a bigger hole. You know the old saying the weatherman could not predict rain until he opened the window and looked outside.
By 2013, the U.S. Energy Information Administration is expecting the price of natural gas to rise above the $3, averaging $4.14 per British thermal units, according to its short-term energy outlook report for January 2012.
This week the range should stay close to the current trading with no unexpected reports or changes due.
2.67 to 2.75 is the expected range this week.
Just a side note, keep an eye on the Iran situation, if crude is pushed up, natural gas could go along for the ride.
If inventories keep setting new records, the glut in the fuel will only deepen. In December of last year, inventories were at an estimated 3.5 trillion cubic feet, about 12 percent above the same time last year.
Originally posted here
