Natural gas futures for October ’15 delivery nosedived Sunday evening at the opening of the futures markets and continued lower early Monday morning.
Prices were at $2.654 per mmBtu, down over four cents from Friday’s close.
Technically, the commodity is nearing important levels on Monday. Support on the October ’15 contract has twice held at $2.64 per mmBtu since April 28, 2015. With prices just one penny away from this key support level, any break below this level could finally break the commodity from its four-month trading range between $2.64 and $2.95.
Another technical indicator, the Relative Strength Indicator, which is a measure of oversold or overbought conditions, stood at 37. An RSI of less than 30 would indicate the commodity is oversold.
Natural gas traders and investors are keeping a closer eye on end-of-injection season levels. Current storage levels stand at 3.03 trillion cubic feet, almost 20% higher than storage levels during the same week in 2014.
At the same time, weekly injection levels are lower than 2014. Last week, the U.S. Energy Information Administration (EIA) reported an injection of 53 Bcf. During the same week in 2014, the injection was 86 Bcf. Likewise, analysts are estimating an injection for the current week of 60 Bcf compared to an actual injection of 77 Bcf during the same week last year.
On Friday, Baker Hughes reported that the total number of natural gas rigs remained unchanged at 211. The level is the lowest number of rigs reported by Baker Hughes since it started reporting the rig count in 1987.
“Today is a critical, critical day for natural gas. Do we finally break the long-running trading range, or do these levels hold as support?” said Steve Kingston, a reporter for NatGasInvestor.com.
“A hold of these levels at $2.64 would be bullish in terms of technical support because the level would have held in three separate tests of the level. In the other two tests of this support, prices bounced rather quickly.”
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