The reason we've been pitching $3.24 for the last couple months is the top of the gap from last year:
From the CME:
NG bearish even after reclassification
The market reacted strongly to the downside immediately after the release of what many thought was a huge miss to the upside in this week's inventory injection. However, the EIA reclassified its base gas as it normally does about once a year. Reclassifications from base gas to working gas resulted in increasing working gas stocks approximately 14 Bcf for the week ending August 2, 2013, in the West Region. These reclassifications had the effect of increasing the implied net change from 9 Bcf to 23 Bcf in the West region, and from 82 Bcf to 96 Bcf in the Lower 48 states for the week ending August 2, 2013.And today's price action via FinViz:
The 96 BCF injections would have been 82 BCF build prior to the reclassification. Although the 82 BCF injection is not as bearish as the headline 96 BCF number it was still greater than last year and the five year average as well as the market consensus which was looking for a 77 BCF injection.
As of this writing the market is trading either side of unchanged for the session (so far) as it appears that there is some light covering taking place. Overall I have not changed my view of the market based on the reclassification as the going forward period is likely to continue to see weekly injections above normal as the short term weather forecasts remains biased to the bearish side.
The latest NOAA six to ten day and eight to fourteen day forecasts continue to suggest that the call on weather related Nat Gas demand is likely to remain below normal for this time of the year. About one-third of the US (highly populated eastern region) is expected to experience colder than normal temperatures well into the third week of August with the west and Deep South expecting above normal temperatures. Overall the call on Nat Gas for power generation should continue to be lower than normal and thus the weekly inventory injections should outperform during the aforementioned timeframe.
From a technical perspective the market remains within the boundaries of the $3.20/mmbtu to $3.41/mmbtu trading range that has now been in play for the last six trading session. On an intraday basis the spot Nymex Nat Gas contract did in fact breach the lower support level and actually trade down to the $3.129/mmbtu level or just a few cents above the next key technical support level. At the moment I do not see anything that suggests this is the beginning of an upside rally in Nat Gas prices rather I view this a resting area as the market digests today's fundamental data....MORE
