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Natural Gas: Resistance At $8.50 Confirms The Downtrend

Published 09/18/2022, 04:56 AM
Updated 07/09/2023, 06:32 AM
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natural gas on the NYMEX had a very volatile week before closing, 2% lower than the previous one at $7.81. EIA reported on Thursday, a rather bearish build of 77 Bcf in working underground stocks for the week ended Sept. 9. Total inventory is currently at 2,771 Bcf, 7.4% lower y/y, only 11.3% below the 5-year average.

Natural gas 4-hour chart.

The market gave us another 9% fast. Price got scorned once again from incredibly high levels. The recent rail deal with labor unions did enough to avoid another supply-chain and commodities crisis in the United States.

At least, that was the excuse for the recent spike in natural gas in most of the pricing hubs. Since last May, we have been selling rallies on exhaustion on the near-term charts, anticipating the post-winter downtrend after we first identified a seasonal ceiling for natural gas.

The latest $8.50 resistance level has to do enough and confirm our strategy. We have no intention whatsoever of buying this market. The direction is for a $3.50 April contract. Any spike will have to be sold immediately.

Vladimir Putin, the last world leader acting as a fossil fuel salesman, is now begging Europe to take his Nord Stream 2 flows. Europe won't even be needing Nord Stream 1 in a while. In the best-case scenario, Europe will only need a fraction of 1/30 of total U.S. consumption in the next decade.

That will bring the total American exports to 3/30 of the total domestic demand for natural gas. The crucial domestic gas-fired electricity generation market share will only be preserved on lower pricing amid competition from renewables, nuclear, electrification, and the energy transition in general.

We have been warning about this since April. The IMF argues that global investment in renewable energy needs to increase fivefold or even tenfold for some scenarios and countries over the next decade.

U.S. macro data and the Dollar against majors are to be monitored routinely. Daily, 4hour, 15min MACD and RSI are pointing to entry areas.

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