Natural Gas Support At $3.30 To Be Tested

Natural Gas futures on the Nymex had had a volatile week before closing 7% higher than the previous one at $4.22. EIA reported on Thursday a rather bullish draw of 179 Bcf in working underground stocks. Inventory is currently at 3,016 Bcf, 6.2% lower y/y, 2.4% above the 5-year average. Both percentages are looking steady while the average rate of withdrawals from storage is 23% lower than the five-year average so far in the withdrawal season.

After the price crashed quickly on this post-winter downtrend, we had been anticipating a relief rally before start selling again. The recent blizzards in the North East part of the United States have offered just that. Any spike will be considered as a true seasonal gift on our way to $3.30 for the shoulder contracts. The same ranges will give multiple times the profit as the market is having tough times in finding new buying volumes from the crucial domestic market. This is happening at a time when LNG exports are at record high. American Natural Gas' affordability has been saving Europe's dignity recently. So far this month EU's import volumes of American LNG have been 5 times higher than the Russian's pipeline transition.

Range bound behavior on colder weather is expected until the market tests the $3.30 support level. At that point we are going to be looking for a seasonal floor. U.S. macro data and the Dollar Index have to be routinely monitored. Daily, 4hour, 15min MACD and RSI are pointing to entry areas.

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