Natural gas futures soared to a multi-year high early in the session before posting a dramatic reversal to the downside on Wednesday. The volatile price action has put the market in a position to close lower for the day.
The early rally through the previous top at $6.425 reaffirmed the uptrend, but the sharp sell-off has now put the market in a position to possibly change the main trend to down on a trade through $5.469.
At 18:28 GMT, December natural gas futures are trading $6.593, down $0.623 or -9.69%. The intraday high is $6.593.
This week’s rally has been supported by a drop in U.S production and global supply concerns.
The turnaround in the market suggests speculative buyers were booking profits and squaring positions ahead of Thursday’s U.S. government weekly storage report and expectations of ideal weather conditions.
Asia LNG Spot Price Surges by 40% to Record High
Asia liquefied natural gas (LNG) spot prices surged by 40% to a record high over $56 per million British thermal units (mmBtu) on Wednesday, amid a global energy crunch, low gas inventories and mounting supply concerns.
Price agency S&P Global Platts’ Japan-Korea-Marker (JKM), which is widely used as a spot benchmark in the region, climbed to $56.326 per mmBtu on Wednesday for a cargo delivered into North Asia in November, recording the largest single-day price increase of $16.65 from Tuesday, its data showed.
“Surging European gas prices exerting upward pressure on Asia-Pacific LNG cargo prices as trading houses and portfolio majors raised bids to attract volumes into Asia,” said Kenneth Foo, head of Asia LNG Pricing at S&P Global Platts.
Short-Term US Weather Forecast
Bespoke Weather Services said though still too early to say with certainty, weather models and the base La Nina state indicate that October is still on track to rival October 2016 in terms of lowest demand. The forecaster expects this low-demand pattern to continue into late month, “if not all the way into at least the start of November.”
Short-Term Europe, Asia Weather Forecast
As for Europe, Maxar’s Weather Desk expects below-normal temperatures blanket the Southeast and into the Continental region. Above-normal temperatures are forecast in northern and western Europe.
The Maxar team also said the 30-day and 60-day composite outlook for Asia continues to feature near-term temperatures across Japan. “However, risks are cooler across the country in both October and November.”
December natural gas traders will be eyeing the 50% to 61.8% are at $5.736 to $5.534 into the close on Wednesday. This area is the short-term support. If it fails to hold, sellers could take out the main bottom at $5.469. This would change the main trend to down and could trigger a further break into the retracement zone at $5.269 to $4.956.
On the upside, overtaking and holding above the pivot at $6.031 will indicate the presence of buyers.
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This article was originally posted on FX Empire