Tuesday, March 6, 2012

With Yesterday's Collapse Natural Gas Broke Chart Support

The futures are up 3.8 cents at $2.393. We are looking for sub-$2.00 by late May-early June as storage tops off and production is diverted to the spot market. The expectation is that the futures will converge down to meet the cash market.

From Reuters 3:45pm Mar. 5:
US natgas futures end down 5 pct, break chart support

Futures remain above January's 10-year low
    * Mostly mild U.S. weather ahead for next two weeks
    * Coming up: EIA short-term energy outlook Tuesday

 (Releads, changes byline, updates closing prices, adds
    By Joe Silha 
    NEW YORK, March 5 (Reuters) - U.S. natural gas futures
ended down sharply on Monday, with mild late-winter weather and
record-high supplies driving the front-month contract below
technical support. 
    "It looked like a bottom had been forming -- we've been
moving sideways for weeks -- but now it looks like we're seeing
a breakdown," said Richard Ross at Auerbach Grayson in New York. 
    While planned output cuts by several key producers and
unexpected nuclear plant outages have lent some support to
prices in the last few weeks, traders said the huge overhang in
storage plus tapering winter demand were likely to keep gas
prices on the defensive without more weather demand. 
    The front-month gas futures contract on the New York
Mercantile Exchange, which gapped lower on the open, finished
down 12.9 cents at $2.355 per million British thermal units
after sliding late to a one-month and contract low of $2.35. 
    Chart traders noted the nearby contract broke below a
symmetrical triangle pattern on Monday and closed on a weak
note, a possible sign that more downside was in store. 
    They pegged the next technical support at the 10-year low of
$2.231 hit in late January and then in the $2 area.... 
Nymex Natural Gas Continuous Contract 4 Hours Chart
Nymex Natural Gas Continuous Contract 4 Hours Chart