- More `extremely low' supply withdrawals likely ahead: Schork
- Relative strength index signals oversold natural gas market
The bad news keeps coming for U.S. natural gas bulls.
Gas futures extended a decline to seven days, the longest losing streak in three years, after government data showed the smallest stockpile drop on record for the time of year. Inventories fell by 34 billion cubic feet last week, compared with the five-year average withdrawal of 120 billion for the period, according to the U.S. Energy Information Administration.
Futures are heading for the biggest annual decline since 2006 as mild weather erodes gas demand, expanding a supply glut amid a flood of production from shale formations. The 14-day relative strength index, or RSI, has been below 30 since Dec. 11, a condition that some traders view as a technical signal to buy.
“This was an extremely bearish storage number,” said Stephen Schork, president of Schork Group Inc. in Villanova, Pennsylvania. “When you consider gas near $1.80, it’s incredibly low. The next price moves are going to be dictated by what the second half of the winter looks like.”
Gas futures for January delivery fell 3.5 cents, or 2 percent, to $1.755 per million British thermal units on the New York Mercantile Exchange, the lowest settlement since March 23, 1999. Prices are down 39 percent this year.
A survey of Bloomberg users had predicted a stockpile decrease of 36 billion, while analysts forecasts showed a withdrawal of 40 billion. Supplies were 9.1 percent above the norm as of Dec. 11, the most since 2012 for the second week of December.
Storage withdrawals will probably be “extremely low” through the end of the year amid unusually warm weather, Schork said.
Temperatures may be above normal in the U.S. East through the end of the year, according to Commodity Weather Group LLC. Chicago’s low on Dec. 25 will be 41 degrees Fahrenheit (5 Celsius), 21 more than usual, AccuWeather Inc. data show.
Natural gas production is poised to reach a fifth straight annual record this year, even as prices decline, government data show. Output will climb 6.3 percent to 79.58 billion cubic feet a day as supply from the Marcellus and Utica shale reservoirs expands, according to the U.S. Energy Information Administration.