Infinity Insights - Volume 11, Issue 42
AT-A-GLANCE SUMMARY
Natural gas prices are driven by weather or lack of the same.
SUMMARY OF THE LAST WEEK IN CHARTS
Spot month natural gas (December) support is 4.75 with resistance at 5.20. Calendar year 2022 finds support at 4.00 with resistance at 4.50. Calendar year 2023 has support at 3.40 with resistance at 3.65.
Roadmap
NYMEX natural gas spot month (December) closed $0.725 down at $4.791 compared to last Friday’s Close.
Calendar 2022
Calendar 2022 settled ≈$0.165 lower at $4.1575.
Cal 2023
Calendar 2023 closed ≈$0.065 higher at $3.4925.
OUR TAKE ON THE MARKET
THE "WIDOW MAKER"
Volatility…
NYMEX Natural Gas
Natural gas prices are driven by weather or lack of the same. The current bull market has stalled for the winter months as it’s not been cold. That will likely change, but when? There is currently a cold incursion and falling prices have begun rebounding. The degree of reaction will be directly related to how long the weather stays cold. The lack of weather is evident in the “Widow Maker” (March/April) spread chart (see above). Prices have retreated back to where the movement began. Hence the spread’s name.
Putting price levels in perspective, we note that spot-month natural gas (December) has dropped about $1.50 from its peak to its recent low. The curve from 2022 out, on the other hand, has dropped $.20 to $.25 from their highs. Volatility is greatest at the front of the curve, which is logical as it is most sensitive to events and conditions. The back of the curve moves with lower volatility. Price support in the back is usually found at $2.50 with resistance at $3.00. Today, calendar strips 2022 through 2027 are all above $3.00. They are only $.50 from strong support and not egregiously expensive. As we suspect that these lower prices will converge to higher prices as they near the front of the curve. Plan accordingly.
WHOLESALE POWER
ERCOT
Prices retreated slightly with weakness in natural gas.
PJM
Prices retreated slightly with weakness in natural gas.