Natural Gas Fundamentals Are Coming Into Play

Natural Gas futures on the Nymex had a volatile week before closing 2.3% higher than the previous one at $3.00. EIA confirmed on Thursday a rather average build for this time of year of 115 Bcf in working underground stocks for the week ended May 21. Inventory is currently at 2,215 Bcf, 14.7% lower y/y, 2.8% below the 5-year average. The refill season is still looking shallow following the February blizzards only a month away from Dog Days temperatures and the inevitable increase in demand for cooling.

The Daily MACD crossed bearish recently as we had anticipated. It has already offered us a 6%-7% on directional trading towards the season's floor. Ranges have moved well above this floor rather quickly. Tons of fresh buying volumes are still needed. We are at the end of the shoulder season when too many market participants are making their minds about the winter contracts. This is the first time after several years I feel wary about the upcoming seasonal uptrend. Seasonality has to be well respected of course, even Goldman Sachs was wrong last Autumn. A $4.00 Natural Gas had to wait for the winter of 2022 as the post-winter downtrend had been offering safe directional trading. We took more than 40% twice. After five very profitable seasons I have a bad feeling about this. The fundamentals have to be taken very seriously. Competition is getting tougher. Utilities and customers need an affordable final product. Low interest rate environment cannot be an excuse for speculative spikes. Not when an economy must fully recover first.

We are going to trade the near term charts on momentum as range bound behavior is highly anticipated, while we remain vigilant to see the next support level above the $3.20 pushing this market in an uptrend. The pricing of Natural Gas, amid ageing pipeline networks, ban of flaring, ban of use in new homes and commercial buildings in many states, it is still its best asset. The crucial domestic market share of gas-fired electricity generation has to be preserved at all cost. Natural Gas can spike for the winter of 2022 but I firmly believe that the 2016 lows are still shaping this market's sentiment. Is $4.00 attainable for November of 2021? It has to be. Is it going to be sustainable? The answer is no. We are going to take one support level at a time. U.S. macro data and the Dollar Index to be routinely monitored. Daily, 4hour, 15min MACD and RSI are pointing to entry areas.