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Natural Gas, Stockpiles Surplus

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Hedge Funds turned bearish on U.S. natural gas for the first time in eight weeks as a surplus and warmer-than-normal weather pushed the price of the heating fuel to the lowest level in more than two years. The funds and other large speculators switched from bets that futures will rise to a bearish, or “short,” position of a net 10,344 futures equivalents in the week ended Jan. 10, according to the Commodity Futures Trading Commission’s Commitments of Traders report on Jan. 13.

Natural gas plunged 13 percent last week on the New York Mercantile Exchange the biggest decline since August 2009, after forecasts showed above-average temperatures through January. Stockpiles in the week ended Jan. 6 stood at 3.377 trillion cubic feet, 17 percent above the five-year average. Natural gas for February delivery fell to $2.941 per mmBtu on the Nymex in the week covered by the report and dropped another 9.2 percent to $2.67 on Jan. 13, the lowest settlement price since Sept. 3, 2009.

The contract rose from $ 2.265 to $ 2.320 per mmBtu on Friday 20th January for the first time in 8 trading days, after dropping as much as 5 percent, the biggest decline in more than five years. Friday’s price action can be seen as an oversold bounce back, if the current lows at $2.264 do not hold as a newly formed support the price will move in to uncharted territory. Alternatively any further upside will initially be capped by $2.790 level which is previous falling support trend line, now newly formed resistance and 20 Day Moving Average.


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