Natural Gas Futures on the NYMEX faced a very negative week before closing 21.3% lower than the previous one at $4.09.
EIA reported on Thursday the second withdrawal of the season of 59 Bcf in working underground stocks for the week ended Dec. 2. Total inventory is at 3,564 Bcf, 9.5% lower y/y, 2.4% below the 5-year average.
Price crashed quickly after testing the latest support level at $4.80. Ranges moved lower very fast in this continuation of the post-winter downtrend. Since the beginning of the uptrend in May, we talked about how wary we felt. We were writing about how much contempt we felt about anything above the $5.00. We still feel the $4.00 level to be expensive but this is where directional trading is becoming trickier and we might need to see a relief rally before we start selling again.
We do not want to become too greedy about this idea after getting two times 50% in real time trading in the past seven months. The May contract is currently trading at $3.70, so we have to have another 30% in downtrend until the spring contracts are going to be trading in larger volumes.
All the above happened at a time when large banks, who seized oil and gas assets lately, were calling for another rally. Irresponsibly and with selfishness not taking into account the economic recovery and the provoked inflation. Many times with artificial tightness of the supply.
We all need to reflect for a moment, after what just happened in the U.K. midstream industry this season. All the above happened at a time when feed gas demand for the U.S. LNG export terminals reached the highest weekly average on record. LNG exports are irrelevant. We have been warning about this for years, as more than 85% of the U.S. natural gas is being consumed domestically.
We have been warning about the gas-fired electricity generation market share—for years—how crucial it is going to be. Renewables and new generation Nuclear are looking really strong. Technically Recoverable Resources are at record highs in most parts of the world. Pipeline transition will always be cheaper than LNG transportation. Pricing will be the last marketing tool left for the fossil fuel industry, only a few years before the peak of demand.
Range bound behavior will be crucial to identify; from now on, we are going to let the market decide for us for the next resistance level at $4.20. The same ranges are giving multiple times the profit on near term chart trading. U.S. macro data and the Dollar Index are to be monitored routinely. Daily, 4hour, 15min MACD and RSI are pointing to entry areas. 