Natural Gas Approaching $2.25 Support
Dimitris Kontoulis | Jan 23, 2021 09:53AM ET
Natural Gas futures on the NYMEX had a negative week closing 11.2% lower than the previous one at $2.44. EIA confirmed on Friday a rather bullish withdrawal of 187 Bcf in working underground stocks for the week ended January 15. Total inventory is currently at 3,009 Bcf, 1.2% higher y/y, 7% above the 5-year average. Stocks were 5% above the 5-year average in the beginning of the withdrawal season early in November.
On a continuation of this post-winter downtrend, price fell hard and quickly from levels of old resistance as we had anticipated, forming its fourth leg and it is now close to strong support. The market struggles to find fresh buying volumes for quite some time now. We have wanted to confirm the $2.60 level as the new resistance for price to naturally reach lower lows. Another $2.25 touchdown is very likely until the end of spring, just before the market reverses on seasonality for the winter of 2022. January 22 contract remains flat at $3.00 while EIA somehow optimistically expects a $3.50 peak. Three months ago EIA was wrongly optimistic about the current demand, many banks were too. We have been selling rallies on exhaustion on near term charts since late October when we have identified a seasonal ceiling and we do not want to become too greedy about this idea now. We had correctly predicted that the market's seasonality feature would have not being affected by exterior factors. Changes in supply and demand were already factored-in early last summer. We will now let the market decide for us, potentially showing us another range lower. Range-bound behavior will be very likely for the coming months as shoulder contracts are now trading in larger volumes.
The outlook does not look bright as consumption is easily keeping pace with demand amid the industry's consolidation. Technically Recoverable Reserves are at record high while the online rig count is starting to go up lately only two months before the new refill season begins. Renewables are directly challenging the domestic gas-fired electricity generation market share. From all planned U.S. utility-scale electricity generation capacity additions in 2021, Natural Gas will account only 6.6%. Solar and Wind combined will offer a 70% share. U.S. macro data and the Dollar Index to be routinely monitored. Daily, 4hour, 15min MACD and RSI are pointing entry areas.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.