Natural gas futures on the NYMEX had a volatile week before closing 2.2% lower than the previous one at $5.30. On Thursday, the Energy Information Administration (EIA) confirmed a build of 92 bcf in working underground stocks for the week ended Oct. 15.
Total inventory is currently at 3,461 bcf, 11.7% lower YoY, 4.2% below the 5-year average, and just 1% more since last May when the price was $3.00.
We have stopped the buying operations more than a month ago. We have been selling rallies on exhaustion since then, on near-term charts. Resistance at $5.75 for the next contract will affirm the post-winter downtrend. Then we will look at the $4.80 level for a new one.
The ranges can offer multiple times the profit. The market has already provided us with 25% returns after reaching the seasonal ceiling.
Meanwhile, fundamentals are coming into play. The Russian President has been acting as a salesman for natural gas companies lately. In the past, former US President Trump had tough times in finding new clients.
The producers are overreacting because of new legislation put in place around the world. The gas-fired electricity generation market share is very fragile because of renewables. Even the nuclear lobby is back for good.
Soon after some trillion dollars in damages because of the climate crisis, the fossil fuel industry will be left with only one marketing tool, pricing.
Governments could nationalize any non-affordable production because of how crucial the commodity remains for human development. Any arguing about lack of investment or LNG exports is irrelevant at this point.
Recoverable Resources are at a record high worldwide. Today, President Putin promoted natural gas by arguing how many trillion cubic meters are available for the Nord Stream. Natural gas is endless, he said. China has just confirmed peak demand is coming in 2026 for its oil and gas needs.
In the US, where gas-fired electricity generation accounts for more than 40% of total consumption, the May 2022 contract is currently trading at $3.90. June 2024 is trading at $3.00.
Speculative spikes offer hedging opportunities for many market participants at this time of year. We must respect seasonality and the underlying fundamentals.
Keep an eye on the US macro data and the US dollar index futures. Daily, 4-hour, 15-min MACD, and RSI are pointing to entry areas.
