Natural gas futures on the Nymex had a positive week before closing 3.8% higher than the previous one at $3.00. EIA reported on Thursday a bearish build for this time of year of 77 Bcf in working underground stocks for the week ending October 30. Total inventory is currently at 3,801 bcf, 2.8% lower y/y, and 1.4% above the 5-year average.
The market has been moving south during the past month; the moment the forward contract is trading at larger volumes, sellers become too aggressive. We have been cautious since we have not yet seen clear support at $3.25, but we still want to buy any dip of this market on the near-term charts. The daily MACD is looking ready to cross bullish, and we are going to have another good trade this month, as we did in October on the 4hour momentum change. Of course, the refill season has been extended as anticipated, and the next storage reports will be crucial enough for the continuation of the uptrend. We still believe that we are going to see a winter spike until February.
I do not believe the outcome of the US midterm elections will trigger any significant developments in the natural gas market. The industry already has a direction and a limit, fundamentally speaking. As I have been explaining since 2022, American producers—much like Donald Trump—have been very optimistic regarding LNG exports. The international markets do not appear to share this enthusiasm, nor do most foreign governments, which view the climate crisis as a genuine threat to their national security. American LNG cannot compete with other forms of energy—unless the price for the end consumer drops to one-fourth or one-fifth of its current level. The European Union is exploring scenarios for domestic production—including lignite—so that if the transition is delayed for a few years, it can at least rely on domestically produced energy. The same will apply to most Asian markets. The above factors make the domestic electricity generation market even more critical for American producers. The year 2027 will reveal whether we return to the one-dollar contracts. US macro data and the Dollar Index have to be monitored routinely. Daily, 4hour, 15min MACD and RSI are pointing to entry areas.
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