Gas Petrospective – June 10, 2011
Natural gas prices dropped more than 17 cents per million Btu yesterday after the EIA released its weekly report showing a build of 80 bcf; analysts surveyed by Dow Jones had been looking for a build of 77 bcf. It was hardly a major disparity, but this market has needed a reason for there to be a corrective selloff for days now, so this was as good a reason as anyone was likely to get for a while. Had prices not advanced to fresh 10-month highs all week long prior to the report, traders could have looked at the comparative levels of stocks and that is bullish enough to trigger new buying.
Stocks are 255 bcf (-10.44%) lower than a year ago, against a deficit of 237 bcf (-10.11%) a week ago. Against the five-year average, they are 58 bcf (-2.58%) less than a year ago, compared to 68 bcf (+4.37%) higher nine weeks ago. Last year there was a build of 98-99 bcf and the five-year average is a build of 94-96 bcf, so this week’s report actually made the picture more fundamentally bullish.
Prices were overbought going into yesterday’s session, but the selloff relieved the pressure to an extent. They are still overbought enough to drop further. Prices found support at the median, green Bollinger Band yesterday, but they may continue lower to test support at the lower, red band.
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