Natural Gas Higher Support In Sight

Natural Gas futures on the Nymex had a volatile week before closing on Friday 5.2% higher than a week ago at $1.79. EIA confirmed on Thursday a build of only 37 Bcf in working underground stocks which is bullish for a week ending July 17. Inventory currently 25.6% higher y/y, 15.7% above the 5-year average. Both percentages were coming down steadily in the past 3 months despite that the average rate of injections into storage remains 12% higher than the 5-year average so far in the refill season. EIA expects the percentage to be well down compared to 2019, at the start of the withdrawal season in November.

Here we are in the middle of the summer, with the September contract currently trading at $1.85. January showing weakness lately trading at $2.89. We are buyers since we have identified a floor amid the coronavirus crisis and the post-winter downtrend. We have no intention to follow negative moves for the months to come. Buying the near term charts on momentum is what we like to do, any dip and pullback is to be bought early so we can follow the uptrend on seasonality and be profitable multiple times from the same ranges. We first need to clear $1.70 - $1.80, an area that has been offering support and we need to see new higher lows with the October contract. This move will cement further the overall sentiment and will offer hedging opportunities for many market participants as the price on supply and demand showed extraordinary stability during the crisis and it is showing more strength during the industry's ongoing consolidation. $2.50 must now be considered attainable for winter contracts.

The coronavirus concerns, however, will be very much alive for at least another quarter. Although U.S. housing data are showing promise lately, the service sector is failing to recover fast enough and the consumer sentiment remains negative as initial jobless claims rose for the first time in four months. U.S. macro data and the Dollar Index to be routinely monitored. Daily, 4hour, 15min MACD and RSI pointing entry areas.