Natural Gas on the Nymex had a positive week before closing 11.9% higher than the previous one at $3.09. EIA reported another bearish, however, build for this time of year of 80 Bcf in working underground stocks for the week ended October 18. Total inventory is currently at 3,785 bcf, 2.9% higher y/y, 4.6% above the 5-year average. Both percentages are still in decline, while the refill season is being prolonged.
We wanted to take profits from this momentum we had been anticipating for over a month, while trading the brakes of this uptrend. We are now looking to place on time our next shoulder season Put options, only weeks away before the post-winter downtrend begins. Too many market participants, however, will try to make short-term use of this market on end-of-year trading for hedging purposes. We still want to see this last positive note of winter contracts keeping our near-term buying operations alive, but we must be ready to react quickly, as the probability for this market to go up from here will only offer a spike. We believe that there is a lot of resistance coming from the $3.50 level. Back in July, we talked about this stretch to be our winter ceiling. The Daily MACD is looking ready to cross bullish once again, but at a moment when the 4H chart is already looking overbought.
For some years now, I have argued that the last marketing tool for natural gas worldwide will be its price alone. This became even more evident after Putin’s invasion of Ukraine. Natural gas for too many countries is not even a strategic energy security option. The European Commission, in some of its key scenarios for the energy transition until 2050, does not even consider natural gas as an eligible source of electricity generation. Not even the one transiting by pipelines, while LNG is clearly its most dirty form. I believe that the one-dollar contracts we first met in 2020, and saw again this last spring, will set the benchmark for the coming years. U.S. macro data and the Dollar Index must be routinely monitored. Daily, 4hour, 15min MACD and RSI are pointing to entry areas.
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