Natural Gas: Return To 1991 For The Russian Economy

Photo by Martin Adams on Unsplash 

Natural Gas futures on the Nymex had a volatile week before closing only 2% higher than the previous one at $4.48. May contract is trading at $4.49, October contract at $4.59 on decent volumes for this time of year and May 2023 is currently trading at $3.38. EIA confirmed on Thursday a bearish draw of 129 Bcf in working underground stocks. Inventory is at 1,782 Bcf, 10.5% lower y/y, 10.7% below the 5-year average. Both percentages are now looking on a steady decline, only a month before the new refill season begins.

The American benchmark is showing to the rest of the world how important energy security is going to be in the next decade amid the global energy transition.

European gas benchmarks went +60% on Thursday, then -35% on Friday amid European utilities panicking ... and ordering from Gazprom and other important European producers. For years the European political elite has been funding the Russian monopoly. It has been funding a war against the sovereign country of Ukraine it appears like. My feeling is that the Russian economy will lose more than one-third of its GDP in the coming decade.

Of course a new golden opportunity arise for American producers to explore new exporting destinations and larger trading volumes. I have been arguing for years that the responsible pricing will deliver but the crucial market share will always be the domestic gas-fired electricity generation amid the energy transition. So every oil and gas company should work hard for a cleaner output. Renewables and nuclear are looking to be really strong.

We want to continue selling rallies on exhaustion until we reach a seasonal floor later in May. We have to operate with surgical accuracy on near term charts as the downtrend has lost its aggression. Then we are going to be looking for a winter uptrend while we will be trading the autumn contracts in larger volumes. U.S. macro data are looking bad lately. The Dollar against majors will have to be monitored routinely. Daily, 4hour, 15min MACD and RSI are pointing to entry areas.

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