Natural Gas Support At $2.40 To Be Tested

Natural Gas futures on the NYMEX had a volatile week before closing 5.5% lower than a week ago at $2.54. Every single contract through 2023 has lost momentum over last week. October contract still trading in large volumes for this time of year, currently at $2.71. EIA confirmed another bullish withdrawal of 152 Bcf in working underground stocks for the week ended Dec. 23. Total Inventory currently at 3,574 Bcf. 8.4% higher y/y, 6.5% above the 5-year average.

The pace of reduction has been finally looking normal over the last couple of weeks. Online rigs still 38% fewer than a year ago, yet the production is comfortably keeping pace with demand amid the industry's consolidation as the total need for U.S. Natural Gas is 5% lower year-over-year. The U.S. consumption is down 9% than a year ago. Looking way better than it had looked a month ago. Colder weather is offering some kind of support as anticipated. Downtrend however is set to continue.

Is this its third leg? Price came down too quickly and before we see lower lows we could have range-bound behavior as support at $2.40 is looking strong for now, the same way did resistance at $2.90. We want to see the Daily MACD cross bearish once again. A lower resistance level is to be confirmed next around $2.60. Lower support must be tested first. Shoulder contracts will be trading in larger volumes in a month from now, it seems we have another four tens of a dollar on the downside before thinking of $4.00 NG for the next winter. January 2022 currently trading at $3.00. The market is in desperate need of buying volumes after a seasonal ceiling has been reached.

We are selling any bounce or rally coming our way on the near term charts, we do not want to engage in buying activity at these ranges- this time of year. U.S. macro data and the Dollar against majors to be routinely monitored. Daily, 4hour, 15min MACD and RSI pointing entry areas.