Last week, natural gas futures witnessed heavy selling pressure after testing a new peak at $8.063. No doubt that the bears were busy creating new short positions above $7.5; the flow of U.S. natural gas could turn towards Europe, trying to lessen their dependence on Russian natural gas.
Russia accounts for around 40% of the European gas supply, and a sudden blockage could create a supply-gap for them. U.S. NG is the only immediately available alternative that could counter Russian supply, as the world attempts to sanction Russia as it continues its violent behavior in the Ukraine, ongoing since Feb. 24.
The sudden surge in Asian demand for natural gas could add one more leg to NG prices in the short-term, as the changing climate concerns are extending the demand for natural gas globally.
The global attempt to check Russia economically would ensure frequent flows of US natural gas worldwide.
Also, re-appearance of a new variant of COVID-19 could disrupt supply-chains, along with production activities.
The demand-supply equation appears to be in favor of natural gas bulls as its price-movement is ever more dependent on geopolitical events, than weather-generated moves.
In the weekly chart, NG appears to have closed at a decisive point, testing a new peak at $8.063 which has been attracting bears to remain active since Apr. 18.
The weekly closing level is still in the upper channel of the long uptrend and a gap-up opening on the first trading session of the upcoming week could confirm a breakout once again.
The daily chart shows NG finding massive support at the 26 DMA—currently at $6.378—with immediate resistance possibly at the 9 DMA, which is currently at $7.156.A sustainable move above $7.388 will result in a breakout move during the upcoming week.
Volatility could remain high during the upcoming week but, the overall trend could remain upward if NG does not break massive support at $6.316. On the upper side, NG bulls could turn aggressive above $7.777.
The rollover on Apr. 27 could generate a short-squeezing rally as the bears could find themselves trapped with strong upward moves during the first two trading sessions of the upcoming week.
Disclaimer: The author of this analysis does not have any position in Natural Gas futures. Readers are advised to take any position at their own risk; as Natural Gas is one of the most liquid commodities of the world.