Natural Gas News: Natural Gas Futures Slip as Texas Pipeline Adds Supply
October natural gas futures sold off on Friday after getting rejected by the 50-day moving average at $2.930. On Thursday, the market spiked through the 50-day MA to $2.990, but couldn’t hold on to most of those gains, settling at $2.914.
The price action indicates that trader reaction to the 50-day MA is likely to determine the near-term direction on the daily chart.
A sustained move over the 50-day MA is likely to indicate the presence of buyers. If this creates enough upside momentum, then look for a drive through $2.990 and into the intermediate 50% to 61.8% retracement zone at $3.044 to $3.133.
A sustained move under the 50-day MA is likely to signal the presence of sellers. The new short-term range is $2.668 to $2.990. Its retracement zone at $2.829 to $2.791 is the primary downside target. If $2.791 fails to hold, then we could see a labored break with potential targets at the main bottoms of $2.747, $2.685 and $2.668.
The Supply Side Did Not Need Another Pipeline
Natural gas production was already running well above last year before the Hugh Brinson project showed up on the calendar. The pipeline adds about 2.2 billion cubic feet per day of capacity from the Permian Basin to East Texas, giving Permian producers another route toward Erath, Louisiana, near the Henry Hub delivery point. The line starts September 1. Traders started pricing the additional supply before the first molecule moved.
Lower 48 dry gas production is running at 113.0 bcf per day, up 4.5% from a year ago according to BNEF. Baker Hughes reported the U.S. gas rig count rose by five last week to 132. That is a five-month high, just below February’s three-year high of 134. Producers are not backing off even with Henry Hub below $3.00. The new pipeline gives them another outlet and gives sellers another reason to lean on this market.
