Technicals: NBP Winter ’16 support and resistance levels emerge from the Rough

Technical support and resistance levels for the Winter ’16 contract at the NBP trading hub were established on 23 June, the day after Britain’s largest natural gas storage site was brought offline, according to trade data reported to ICIS.

The NBP is one of Europe’s largest gas markets and is a key price driver for numerous European gas and power markets. NBP prices can influence other gas hubs including the Dutch TTF and German NCG markets along with British, French and Dutch power markets. The NBP is also the key reference price for LNG in Europe.

The candlestick graph shown represents high and low traded values for a given day for the NBP Winter ’16 contract, as well as opening and closing prices. The bar graph displays the volume dealt on the product on a given day.

The following sessions marked a bullish trend for the contract. On 7 July, the market moved towards the contract’s resistance, peaking at 45.20p/th. Since then the product has drifted back down.

The market will typically buy when a contract hits a support level and sell when it reaches resistance.

Should the contract break out of its technical range, there is typically a period of volatility as the market finds new levels.

Rough

On 22 June, Centrica Storage announced that Rough, which holds around 70% of Britain’s storage capacity, would be out of action for 42 days and therefore not operational until at least 3 August.

This caused the NBP Winter ’16 to skyrocket, climbing 3.175p/th from the previous session’s 16:30 London time assessment, the largest day-on-day gain for a NBP front-season contract since 3 March 2014. The product also completely disconnected from the prompt and near curve, where prices dropped as a large component of Britain’s injection capacity, which typically acts as summer demand, was no longer available.

The following day, the winter contract corrected downwards, shedding 1.475p/th as traders unwound some of the gains that had been accrued during the previous day’s frantic session.

Over the two days, just over 1.4 billion therms was dealt on the contract, the highest volume over two consecutive sessions in 2016. Technical levels are typically formed during periods of high liquidity. thomas.rodgers@icis.com