Natural Gas: Bullish Bias Remains in Short Term
Medion Jim May 8, 2020 5:38 AM
The situation of natural gas is similar to crude oil. Investors worried about the decline of demand due to the out-break of COVID-19.....
The situation of natural gas is similar to crude oil. Investors worried about the decline of demand due to the out-break of COVID-19. The NYMEX Natural Gas futures prices fell around 45% from the high of November at $2.862/mmbtu to the low of April at $1.552/mmbtu.
After that, the NYMEX Natural Gas futures prices rebounded around 38% to the high of May 5 at $2.134/mmbtu on the hope of the economy reopening. Currently, the futures prices eased after the U.S. Energy Information Administration (EIA) reported that natural gas recorded 109 Bcf storage injection for the week ending May 1. The total working gas storage was 2,319 Bcf as of May 1, 796 Bcf above year-ago levels.
Recently, Goldman Sachs released a report about natural gas. The bank raised the forecast prices for the rest of summer to $2.05/mmbtu from $1.85/mmbtu. In addition, the bank lowered the U.S. natural gas production estimation for summer 2020 by 0.9 bcf per day and winter 2020-21 by 0.5 bcf per day. Finally, the bank projected that 2021 natural gas prices would average $3.25/mmbtu to incentivize lower demand and higher supply to bring natural gas storage to manageable levels.
From a technical point of view, although the natural gas futures posted a pullback and returned to the consolidation zone on a daily chart, it is still supported by both rising 20-day and 50-day moving averages. Besides, the golden cross between 20-day and 50-day moving averages has been identified, indicating a bullish signal. If the prices returned the level above the consolidation zone, it would enhance the positive outlook.
The RSI also posted a "Bullish Divergence" signal, when the futures prices formed a support base above $1.52/mmbtu. This situation demonstrates that bears are losing power, and that bulls are ready to control the market again. Currently, the RSI is supported by a rising trend line, suggesting the momentum of prices is still pointing north.
In this case, bullish readers could consider to set the nearest support level at $1.70/mmbtu. Trading above this level, the futures prices could consider an advance to the resistance level at $2.16/mmbtu and $2.38/mmbtu respectively.
Sources: GAIN Capital, TradingView
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.