Natural Gas Seeking Higher Highs
Natural Gas futures on the Nymex had a volatile week before closing 0.5% lower than the previous one at $3.83. EIA confirmed on Thursday a build of 42 Bcf in working underground stocks after reclassification. Total inventory currently stands at 2,822 Bcf, 16.2% lower y/y, 5.8% below the 5-year average. Both percentages have been looking steady in the last few weeks.
The market has started ranging weeks ago when it reached the $4.00 mark rather quickly on really warm weather across the Lower 48. It looked expensive back then so we have wanted to buy any new exhaustion coming our way. $3.70 looked a reasonable support level. Not too cheap though so we now need to see higher highs. The same ranges will give us more profits on our way to a potential seasonal ceiling of $4.50 for December.
Trading directionally on seasonality is what we want to do. January contract has last momentum, currently trading at $4.00, so it looks like that the market has another 20% to give in uptrend until early winter. We have already taken 30% from this trading idea, so we want to continue buying the dips but only cautiously as the fundamentals for the U.S. Natural Gas market remain flat if not negative. We are going to let the market decide for us while we keep trading the near term charts, so any positive spike will be more than welcome once again.
U.S. macro data and the Dollar Index to be routinely monitored. Daily, 4hour, 15min MACD and RSI are pointing to entry areas.
What about LNG export adding to the demand picture?
I ve been writing about the fundamentals for years, I tend not to overreact on headlines about U.S. LNG exports getting bigger every year, as the domestic market is the crucial one for the U.S. producers while more than 90% of total production is being consumed in the United States. It is going to be tricky with all the flaring ban, new building use of natural gas ban in many cities etc, it is going to be tricky to preserve the gas-fired electricity generation market share. Price will be a really powerful public relations tool, this applies also to oil, I am expecting a $50 oil barrel in 2023. Many analysts couldn't read correctly the fundamentals for many year, even Goldman was totally wrong last year about Natty and its seasonality. So I would be glad to see this coming, LNG is getting bigger worldwide eitherway, at the same time Technically Recoverable Resources remain at record high in most parts of the world... I am really wary of this. The 2016 price lows are still shaping this market for a reason.
You watch those things closer than I but some like banning gas use in buildings cannot happen as there is nothing to replace it. Electrical supply systems are already stretched beyind breaking point. https://seekingalpha.com/article/4450930-evs-driving-us-back-to-the-future
Oil is something else and I do not invest in that.
US LNG exports are my main bet (plus hydrogen)and the US has a big LNG price advantage.
A bit more is here; https://www.reutersevents.com/downstream/operations-maintenance/us-lng-exporters-seeing-strong-demand-recovery-and-record-volume
and here; https://seekingalpha.com/article/4409377-tellurian-10-bagger-bankrupter
you are reading it somehow correctly, U.S. LNG has to do well in general and in the long run, but you still have to keep in mind that price ratio of crude oil to nat gas will always be important because of the importance of the domestic consumption, so keep an eye on it, and finally pipeline transition will always be cheaper worldwide, geographic proximity really important, see the nord stream paradigm... Even the Trump admin had tough times in finding new buyers for the american benchmarks...
I find pricing confusing and no longer appropriate to today's global situation but the US has an advantage with it. For example, US LNG is being shipped to Indonesia, a country on the doorstep of Australia that is also a major LNG producer.
Nordstream will not supply all of Europe's needs. It is also a long way from southern Europe and the UK etc.
I suspect prices in the US will stay reasonably strong since supply is now being restrained by more sensible producers. I am invested in AR for that.
You watch those things closer than I but some like banning gas use in buildings cannot happen as there is nothing to replace it. Electrical supply systems are already stretched beyind breaking point. https://seekingalpha.com/article/4450930-evs-driving-us-back-to-the-future
Oil is something else and I do not invest in that.
US LNG exports are my main bet (plus hydrogen)and the US has a big LNG price advantage.
A bit more is here; https://www.reutersevents.com/downstream/operations-maintenance/us-lng-exporters-seeing-strong-demand-recovery-and-record-volume
and here; https://seekingalpha.com/article/4409377-tellurian-10-bagger-bankrupter