On Wednesday, natural gas showed some exhaustion as the Biden administration's first sale of oil and gas drilling rights on federal land garnered thin industry interest. At the same time, environmental groups filed two separate lawsuits seeking to invalidate the results.
The sales, which will continue on Thursday and cover eight states, were viewed as a test of oil industry demand for federal acreage amid soaring fuel prices and calls from President Joe Biden to increase domestic output.
A drilling industry group blamed the limited interest on policies that have made oil and gas development on federal lands more complex, such as higher royalties on production and the Biden administration's efforts to stop new leasing.
Biden's Interior Department had attempted to suspend the federal oil and gas leasing program to study its environmental and climate impacts, which a federal judge blocked.
Undoubtedly, this exhaustion seems temporary as the Asian and European demand is still on the higher side after a sharp drop in the Russian gas supply and the Freeport export outage.
In the daily chart, the natural gas futures attempted to find a breakthrough inside the Ichimoku Clouds. But the third attempt could be a complete success as the demand and supply equation still favors the bulls. Natural gas has finally found a strong base at the psychological support at $6 that has a thick assembly of big bulls to provide sufficient support in case of any downward movement.
Currently, the prices are sustaining at the first launching pad at $6.4, which ensures a steep reversal in the coming days. The prices could find a breakout above the immediate resistance at $6.808 after the announcement of weekly inventory on Thursday.
Sustainability inside the Ichimoku clouds could push the natural gas futures to hit the upper end of the Ichimoku cloud, which is currently at $8.188. On the lower side, immediate support is at $6.411, and the second support is at $6.014. I find the overall trend still looks to be in favor of the natural gas bulls, as a steep reversal could start soon.
Disclaimer: The author of this analysis does not have any position in natural gas futures. Readers are advised to take any position at their own risk, as Natural Gas is one of the most liquid commodities in the world.