Natural Gas Downtrend To Offer Selling Opportunities
Dimitris Kontoulis | Nov 22, 2020 03:20AM ET
Natural gas futures on the NYMEX had another negative week closing 7.6% lower than a week ago at $2.66. The January contract is currently trading at $2.78. EIA reported on Thursday a bearish build for this time of year of 31 Bcf in working underground stocks for the week ended November 13. Total inventory currently at 3,958, 8% higher y/y, 6.2% above the 5-year average and above the 5-year maximum. According to EIA, this is the third-highest end-of-refill-season level ever recorded.
We are trading the near-term charts, selling any rally coming our way as the seasonal downtrend will shape the market's sentiment for the coming months. We have been anticipating the first negative legs since a month ago. Ranges are getting wider lately, the price moved lower very fast. October 2021 contract is trading in large volumes already, currently at $2.75 while May is at $2.60. Any production concerns amid the industry's consolidation have been absorbed as demand remains moderate and well below the 2019 levels. Daily consumption for commercial and residential use is currently 41% lower than a year ago. Consumption for electricity generation is down 21% y/y. The total rig count increased last week by 12 and now stands at 312. The average underground natural gas storage capacity utilization is at 93% in the Lower 48.
We are not interested in buying the next contract in front inside this area close to the seasonal ceiling. The earlier Daily MACD positive crossing will offer a temporary buying momentum, on colder weather, which we would want to immediately sell on first signs of exhaustion. U.S. macro data and the dollar index to be routinely monitored. Daily, 4hour, 15min MACD and RSI pointing entry areas.
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