Natural Gas Buying The Dip

Natural Gas futures on the Nymex had a negative week before closing 12.9% lower than the previous one at $2.43. EIA reported one more bearish draw of 84 bcf in working underground stocks for the week ended March 3. Total inventory is currently at 2,030 Bcf, 32.1% higher y/y, 21.5% above the 5-year average. Both percentages have been on an eye-catching ascending lately.

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At this time last year, the working underground stocks were at 1,519 Bcf, a whole 33,6% lower, 16% below the 5-year average at that time.  We had spoken in good time, as early as last April, that despite the Russian invasion in Ukraine, US LNG exports to Europe would not be spectacular. Not even for the next few years. Total exports will not exceed 15% of domestic demand. That is why we always point out how important a role, for its overall demand, natural gas will play in the future domestic electricity generation mix.

Who remembers those uncharted $1.80s? We have recently identified a seasonal floor, however. Support has been strong from the low $2.00s. We remain optimistic that a $3.50 average price can be attained throughout 2023. The recent back-to-back Daily MACD divergences around that floor have been confirming our strategy. We have already taken 30% in buying operations and we need to cautiously buy any dip for the next couple of months. Summer contracts currently trading at $3.00 can easily reach $4.00 in this period. We need to protect any margin on range-bound activity, so we like to trade the near-term charts. The same ranges are giving multiple times the profit.

All the central banks have been able to do in recent months is pass on costs to common borrowers and depositors. So, our focus now is on SVB's story and how it can dominoes in the international banking sector. A crisis that again the taxpayers will have to pay for and therefore the demand for natural gas might be further challenged. U.S. macro data and the Dollar Index must be monitored routinely. Daily, 4hour, 15min MACD and RSI are pointing to entry areas.

More By This Author:

Natural Gas: Identifying A Seasonal Floor
Natural Gas: At $5.00 Support Level.
Natural Gas: Support At $5.00 To Be Tested

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