Natural Gas Breaks Out In Uptrend - What To Expect Next

Photo by American Public Power Association on Unsplash

Natural Gas had a bullish week before closing 10.5% higher than the previous week, at $6.32. EIA reported on Thursday a surprising draw of 33 Bcf in working underground stocks for the week ended April 1. Total inventory is currently very shallow at 1,382 Bcf, 22.4% lower y/y, 17.1% below the 5-year average.

Only a month after we identified a seasonal floor and started again the buying operations on seasonality, the market has already given us more than 30% in real-time trading while it is breaking-out in uptrend. We have talked about a seasonal ceiling of $6.50 for the autumn contracts and we are already there. We do not want to become too greedy about this idea and seek a new series of higher highs from this level. May 2023 contract is currently trading at $4.42 on decent volumes. We are going to let the market decide for us later in May when visibility about the pace of injections will get better and more governments will have made their mind about buying or not the American LNG. The same ranges are to be bought multiple times until later in September. The next two MACD crossings will provide another entry level to us.

The Russian government has already lost more than 4Bn per month in energy contracts. The UAE energy minister appeared concerned last week about his country's and OPEC+ 's future contracts. He warned about, but not threatened, even higher prices. The argument of lack of investment in fossil fuels cannot be taken seriously in 2022. Saudi Aramco, the biggest company in the world owning the largest refinery in the United States in Port Arthur, Texas, has been giving its bondholders half the interest rate given by the Greek Public Power Company for more than ten years. It is not about lack of investment. It is about the producing countries' confusion in the face of the energy transition along with stinginess at a time when Technically Recoverable Resources are at record high all around the world. There is no excuse whatsoever for the oil and gas market and the whole world's economic activity to be undersupplied. This way of thinking is not providing any service to the fossil fuel industry.

U.S. macro data and the Dollar Index have to be monitored routinely. The U.S. dollar shows again to the entire investment community the reason it is the only reserve currency on the planet. U.S. nuclear electricity generation continues to decline but its capacity factor percentage remains steady. U.S. utility-scale energy storage resources in service are at record high. Investment in renewables is expected to triple before 2030. Daily, 4hour, 15min MACD and RSI are pointing to entry areas.

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