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Natural gas ends down, back in bearish mode despite forecasts for cold

Commodities Jan 24, 2023 05:47PM ET
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By Barani Krishnan

Investing.com - Growing expectations for sustained cold temperatures from February helped natural gas to briefly extend a rally from the previous day before falling at Tuesday’s close as short-sellers returned to dominate futures of the heating fuel wrecked by unseasonable warmth this winter.

The front-month March gas contract on NYMEX’s Henry Hub settled at $3.057 per mmBtu, or metric million British thermal units, down 16.5 cents, or 5.1%.

That virtually wiped out Monday’s 5.5% gain, which initially signaled price deviation in a market that has lost about 30% of its value since 2023 began, amid tepid heating demand in one of the warmest Northern Hemisphere winters in two decades.

Prior to the tumble, Henry Hub’s front-month contract hit a 14-year high of $10 in August 2022. On Monday, it hit an intraday low of $2.993 per mmBtu, marking a low since May 2021, before settling well off that bottom at $3.222.

“The potential for an early February freeze throughout large expanses of the US lit a bit of a fuse under NYMEX front-month natural gas futures on Monday,” Gelber & Associates, a Houston-based energy markets trading consultancy, said in a note.

Prices initially faced a “second wave of bullishness” on Tuesday from forecasts that the U.S.-based Global Forecast System and the European ECMWF weather model will show greater Arctic wind intrusions in much of the United States, including gas production areas in Texas, Louisiana, and the Appalachian region, the Gelber note said.

Unlike the late December 2022 Arctic blast that plunged deep into Texas and Louisiana and featured very little, if any, ice or snow, the looming February winter event is threatening to usher in icy precipitation along with frigid temperatures, the consultancy said.

That could potentially extend freeze-offs in oil and gas wells, depending on how much ice ultimately comes to fruition, Gelber said.

Despite the growing conviction for a February freeze, funds in natural gas still sent the market towards the bottom of $3 by Tuesday’s close.

Natural gas ends down, back in bearish mode despite forecasts for cold
 

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Comments (3)
Neera CHOURASIA
Neera CHOURASIA Jan 24, 2023 9:57PM ET
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Last year when price touched $9.4, I posted comment for steep correction and sold lot at that level. Now I see an uptrend to about 20% from current level of $3.1 to touch it upto $3.75 in a week. Last weeks negative inventory also will lead to rally.There has been price drop in last 6months from $9.4 to $3.1. NG consumption is huge in automobiles and industries also. Disclaimer: I have bought 2 lots at current price.
Zaheer Khalfan
Zaheer Khalfan Jan 24, 2023 4:48PM ET
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Barani there was no advance. I see a 5% loss in the front month contract which is again dissapointing and shows that price are being artificially kept low
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Zaheer Khalfan
Zaheer Khalfan Jan 24, 2023 4:48PM ET
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Btw what do you have to say about the fact that there is lasting frigid artic air coming in next week and weather models have already added a lot of HDDs to the forecast yet the price is being kept so low. If this is not manipulation than what is it. The big hedges want to frustrate the helll out of the small investors so they can pick up contracts for $1.
Barani Krishnan
Barani Krishnan Jan 24, 2023 4:48PM ET
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First Last  Hi, thanks. As I explained, I got spoofed by the Feb contract that was still being quoted by some services as the front-month. So when that came in yesterday's March close of $3.22, I took it to be a higher close. The narrative has since been fixed. Bests, mate.
Barani Krishnan
Barani Krishnan Jan 24, 2023 4:48PM ET
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First Last  ... when that came in against yesterday's March close of $3.22 ... I meant
Barani Krishnan
Barani Krishnan Jan 24, 2023 4:48PM ET
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Zaheer Khalfan  My best response would be to take you back to the highs that we saw late last year when storage was clearly doing a lot better than the squeeze expected by many. What the gas funds are doing now seems to be an exact opposite of that game. You're understandably frustrated, given your long bias. But let me ask (and not to rub it in): Did you have empathy then for what the bears/real consumers of gas were experiencing? I remember this great quote from John Maynard Keynes: "Markets can stay irrational longer than you can stay solvent." It is what it is, unfortunately.
Zaheer Khalfan
Zaheer Khalfan Jan 24, 2023 4:48PM ET
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I hear you and unfortunately, I too was bearish back then and got hit badly! I do however think we are on the same page . Both of us agree that the NG market is not driven by any fundamentals. Thanks for your feedback and keep the news posts coming.
Stephen Fa
Stephen Fa Jan 24, 2023 4:36PM ET
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I'm still long $UNG, about even.
Michał Wu
Michał Wu Jan 24, 2023 4:36PM ET
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me too
First Last
First Last Jan 24, 2023 4:36PM ET
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My condolences to you two.
Name Surname
Name Surname Jan 24, 2023 4:36PM ET
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aby? natgas must be bought by european countries to recover inventory before economy more consumption and before next winter
 
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