Natural Gas In Temporary Oversold Territory

Natural Gas futures on the NYMEX faced another negative week closing 10.5% lower than the previous one at $2.55. EIA confirmed on Thursday a bearish draw of just 1 Bcf in working underground stocks for week ending Nov. 27. Total inventory is at 3,939 Bcf, 9.5% higher y/y, 7.9% above the 5-year average and above the 5-year maximum. Both percentages are going up fast since the beginning of the withdrawal season. This is happening at a time when total demand for U.S. Natural Gas is down 30% y/y and online rigs remain 41% lower than a year ago.

We have been anticipating this second leg of the post-winter downtrend. We have only recently identified a seasonal ceiling for this market, so we remain vigilant in selling any bounce or rally coming our way on the secondary market while trading directionally. Although fundamentals are looking bad for another winter, the October 21 contract has been trading in decent volumes lately and it is looking promising enough, currently at $2.63. It appears that we have another four tens of a dollar on the downside until Summer and the next seasonal uptrend.

The market is in need of green volume. Price will have to show another range at some point. Resistance at $2.90 has to be respected while 4hour RSI is looking oversold. We will wait for the next negative leg in the coming weeks. Colder weather will offer support eventually so we will find fresh opportunities to sell the same ranges again. We are not engaged in buying operations at this point. U.S. job market recovery is slowing significantly because of Covid resurgence across the Lower 48, and new stay-at-home restrictions are being issued because of record-high deaths and hospitalizations levels. U.S. macro data and the Dollar Index to be routinely monitored. Daily, 4hour, 15min MACD and RSI pointing entry areas.