Natural Gas Underground Stocks Start To Build Higher

Natural Gas futures on the Nymex faced a negative week before closing 11.7% lower than the previous one at $6.45. June contract is currently trading at $6.60. June 2023 has lost momentum since two weeks ago trading lower at $4.05. EIA reported on Thursday a build of 53 Bcf in working underground stocks for the week ended April 15. Total inventory is currently at 1,450 Bcf, 22.8% lower y/y, 16.8% below the 5-year average. Stocks have just begun curbing higher as they remain in shallow territory just above the 5-year minimum.

We wanted to see an exhaustion following this recent rally on headlines. The latest Nor'easter, the second for the season, and somehow unexpected for this time of year, offered another 15% in profit before that. The direction of this market will remain up for another few months but we now need to see new entry levels. The next two daily MACD crossings will be the important ones, right in the middle of the shoulder season. We are still considering a $6.50-$7.00 level to be a ceiling for the new winter season ahead. Τhe price is easily snubbed at these levels.

We are going to buy any dip on seasonality. The same ranges will give multiple times the profit while the European elite is trying to figure out for alternatives of the Russian oil and gas. The latest orders and projections for the U.S. LNG exports to Europe however, will remain to be only a 3/30 fraction of the total U.S. consumption over the next decade. That is why the domestic gas-fired electricity generation market share is so important to the American producers. Algeria, Egypt, Israel and half of Africa and the Middle East will also take their fair share of the remaining European market, some Russian exports, I guess, will also stay around on smaller volumes. The energy transition will get even more aggressive in the European continent. So this first winter will be the crucial one.

Last December and January, the European Union received record imports of U.S. natural gas, four times the volume it received from Russia in the same period. Henry Hub was then trading at $3.70. And allow me a further comment about the future in fossil fuel pricing. It cannot be that hard for the producing countries to fulfill the European needs of 4 million bpd of oil, the volume that Europe wants to cut from Russia. It is a 3% rise in production for the rest of the producing countries. 7% of the current OPEC production. OPEC alone managed a 10% rise in production in just a year since 2020. Keeping the market artificially under-supplied does not help anyone or any state budget over time. Vladimir Putin must have already learned that. The above discussion will become even wilder in an environment where interest rates will have to rise because of the provoked inflation, caused only by 4 industries worldwide that have been profiteering.

U.S. macro data and the Dollar against majors have to be monitored routinely. Daily, 4hour, 15min MACD and RSI are pointing to entry areas.

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