The natural gas supply was disrupted after Hurricane Ida forced energy companies in the Gulf of Mexico to shut nearly all of the oil and gas production in the region for much of the week, which resulted in a power outage in the Gulf area.
Undoubtedly, this scenario resulted in a steep upward move in the natural gas price to test $4.747 on Sept. 6, 2021. But pressure continues due to cooler temperatures and the torrential rain caused by Hurricane Ida.
Now, the supply deficit will continue to increase unless stronger U.S. production starts to help loosen the balance as it won’t come from a drop in LNG exports because they are expected to remain strong through winter due to tight supplies in Europe and Asia. This could result in a bigger injection announcement on coming Thursday due to increasing stockpiles. Undoubtedly, natural gas futures could find a selling spree after the inventory announcement.
Currently, the natural gas futures showing weakness after the formation of an exhaustive candle on Tuesday in a daily chart, and moreover this exhaustive candle got confirmation by the formation of one more bearish candle beside it. I find that this could continue to increasing selling pressure during this week.
Undoubtedly, volatility will remain higher due to the inflow of both positive and negative news. Delay in production and continuity of supply disruption could encourage bulls to test the next immediate resistance at $4.806 below the psychological resistance at $5. And, a breakout above the psychological resistance could change the whole trading equation. But, I find that a sustainable move below the level of $4.588 could drag down the natural gas to test the immediate support at $4.417 and the next support can be seen at $.4.242.
The growing volatility could provide a good trading opportunity after the announcement of weekly inventory this time. But I find that the need of the hour is to remain cautious because the upcoming moves could be extensively bigger as the Hurricane season is still one month away from its end.
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 of the world.