Natural Gas Futures on the Nymex faced a mixed week before closing 2.80% lower than a week ago at $2.57. EIA confirmed on Thursday a build of 35 Bcf in working underground stocks for the week ended August 28.
Stocks currently 18.4% higher y/y. 13.4% above the 5-year average. Both percentages coming down fast during this injection season although the average rate into storage has remained 7% above the 5-year average. This is one of a few basic factors that made us remain bullish since May. That is when we started buying the dips again, just after the post-winter downtrend and a floor at $1.50 that had been formed in the middle of the coronavirus crisis.
A breakout in an uptrend on seasonality looked very probable then and that is the case. The U.S. oil and gas industry's consolidation is ongoing. Supply and demand will have to be re-examined at the start of the withdrawal season in November. End of year hedging is crucial for this market but we are not there yet.
We have been trading directionally, already taking 20% two times since May in real-time trading, and here is where the analysis gets tougher. Are we on a plateau on our way to $3.00? January contract currently at $3.39 can confirm this. May is at $2.80 and there are too many papers out there calling $4.00 for winter 2022 already.
Let's be cautious and let the trading volumes guiding us. We want to buy any exhaustion on momentum and see where this uptrend goes and how much higher. This is the precious thing about trading directionally on near term charts. You don't have to overanalyze. U.S. housing data really positive lately, the commodity will be well supported in a weaker dollar environment. Let's be careful though with the latest Daily MACD bearish crossing as Fall contracts tend to exhaust on lower demand just before another winter spike. U.S. macro data and the Dollar Index to be routinely monitored. Daily, 4hour, 15min MACD and RSI pointing entry areas.
