Nearby natural gas futures surged on Monday, reversing earlier weakness in reaction to strong cash prices in key demand areas and a pipeline explosion. The market started lower in reaction to cool weather forecasts and near-record production.
Prices are slightly higher early Tuesday with a slight follow-through to the upside. At 1004 GMT, October Natural Gas futures are trading $2.815, up $0.020 or +0.36%.
There was little change in the weather models with forecasts calling for cooler weather. The latest outlooks were only slightly changed from Friday with slightly cooler trends for late this week and the September 15-16 weekend, according to NatGasWeather.com.
Traders are watching the weather on the East Coast as Hurricane Florence continues to strengthen over the central Atlantic Ocean. It is expected to make landfall as a major hurricane over the Carolinas late Thursday or early Friday, and it could be one of the strongest hurricanes ever to make landfall in the Carolinas.
In other news, Energy Transfer Partners LP (ETP) natural gas pipeline exploded in western Pennsylvania. According to Genscape, Inc., based on initial observations, the explosion was not expected to significantly impact nominations on interstate pipelines.
The firm said, “If the explosion is contained to the Revolution pipeline, we do not expect any significant impacts to interstate operations in the area. However, this may hinder the ability of molecules to get onto Rover’s Burgettstown Lateral going forward.”
Traders are watching the hurricane and the impact from the explosion. Furthermore, technical factors are helping to underpin prices.
The buying came in at $2.752, just slightly above the last bottom at $2.751. The volume was strong enough to produce a technical reversal, which tends to fuel a 2 to 3 day counter-trend rally.
The major area controlling the price action is a retracement zone at $2.799 to $2.833. Look for a downside bias on a sustained move under $2.833, and an upside bias to develop on a sustained move over $2.833.
The short-term upside target zone is $2.842 to $2.863. If $2.751 fails then we could see a break into $2.703 to $2.688.
This article was originally posted on FX Empire
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