Natural Gas Breaks Out In Uptrend. What To Expect Next
Dimitris Kontoulis | Apr 09, 2022 09:30AM ET
Natural gas had a bullish week before closing 10.5% higher than the previous week at $6.32. EIA reported on Thursday a surprising draw of 33 Bcf in working underground stocks for the week ended Apr. 1. Total inventory is currently very shallow at 1,382 Bcf, 22.4% lower y/y, 17.1% below the 5-year average.
Only a month after we identified a seasonal floor and restarted seasonal buying operations, the market has already given us more than 30% in real-time trading while it is breaking-out in uptrend.
We have previously discussed a seasonal ceiling of $6.50 for the autumn contracts, and we are already there. We do not want to become too greedy about this idea and seek a new series of higher highs from this level. At time of writing, the May 2023 contract is currently trading at $4.42 on decent volumes. We are going to let the market decide for us later in May, when visibility into the pace of injections will get better, and more governments will have made their decisions whether or not they'll be buying American LNG. The same ranges are to be bought multiple times until later in September. The next two MACD crossings will provide us with another entry level.
The Russian government has already lost more than 4Bn per month in energy contracts. The UAE energy minister appeared concerned last week about his country's and OPEC+'s future contracts. He warned, but didn't threaten, about even higher prices.
The argument over the lack of investment in fossil fuels cannot be taken seriously in 2022. Saudi Aramco (SE:2222), owners of the largest refinery in the United States at Port Arthur, Texas, has been able to continue to give its bondholders half the interest rate that the Greek Public Power Company has for more than ten years.
It is not about lack of investment. It is about the producing countries' confusion in the face of the energy transition along with stinginess at a time when Technically Recoverable Resources are at record highs globally.
There is no excuse whatsoever for the oil and gas market, together with the world's economic activity to be undersupplied. This way of thinking is not providing any service to the fossil fuel industry.
U.S. macro data and the Dollar Index have to be monitored routinely. The U.S. dollar shows the entire investment community once again why it is the only reserve currency on the planet.
U.S. nuclear electricity generation continues to decline, but its capacity factor percentage remains steady. U.S. utility-scale energy storage resources in service are at a record high. Investment in renewables is expected to triple before 2030.
Daily, 4hour, 15min MACD and RSI for NG are pointing to entry areas.
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