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Jim Hyerczyk

Jim Hyerczyk

Fundamental and technical analyst with 30 years experience.

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Natural Gas Still Has Space To Fall

January Natural Gas

January Natural Gas futures declined to a multi-year low at $2.229 earlier in the week, but selling dried up, triggering a short-covering rally and enough upside momentum to put the market up for the week. If it can finish the week over $2.291 then a technical closing price reversal bottom will form. This will be the first sign that the buying is greater than the selling at current price levels.

(Click to enlarge)

This could prove to be difficult because the fundamentals remain bearish. Production remains strong and the commodity’s demand continues to fail to keep pace with the supply surge. Stockpiles held in underground storage in the lower 48 states reached 4 trillion cubic feet (Tcf) for the first time ever. The current storage level is up 11.2% from last year and is 5.5% above the five-year average, according to the latest data from the U.S. Energy Information Administration.

At this time of the year, weather should have the biggest influence on prices. However, so far, winter has been slow to arrive. Sure, snow blanketed much of the Midwestern and Great Lakes states over the week-end, but this wasn’t followed up by a lingering cold spell which would’ve led to increased demand.

Instead of the weather influencing the price action this week, the mechanics of the futures market seem to be exerting the biggest influence. With the December futures contract set to expire, short-sellers have been scrambling…

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