Bullish on Natural Gas

[dan_s]

Nat Gas futures continue to trade above the $3.50/mmbtu breakout area (now support) suggesting that the market may be in the the early stages of a new leg to the upside. The market is currently going through a very light round of profit taking selling but the futures market still remains technically supported at the moment. If the market is able to get through the $3.66/mmbtu resistance level the next upside testing area would be around the $3.75/mmbtu level. From a technical perspective the Nat Gas futures market remains in an uptrend that has now been in play since bottoming in mid-February.

From a fundamental viewpoint inventory withdrawals since the beginning of this year have continued to experience larger net withdrawals than last year. This has resulted in total Nat Gas in inventory moving into a deficit position versus last year by 14.8% and thus keeping the Nat Gas futures market in a modest uptrend for the last month or so. At the moment it looks like this inventory trend could last another few weeks and thus help to keep futures prices above the new $3.50/mmbtu support level. This week's inventory report will be bullish versus last year and the five year average as the net withdrawal will be greater than the historical data for the same period.

This week the EIA will release its inventory on its normal schedule and time... Thursday March 14th at 10:30 AM. This week I am projecting an average withdrawal of 120 BCF from inventory. I now believe we have a very good shot at ending storage levels below 1,800 bcf, which would be VERY BULLISH for gas prices.