Natural Gas on the Nymex had a volatile week before closing 2.8% lower than the previous one at $1.71 on Friday.
Following oil's extreme decline at the beginning of the week, the NG market rallied in the first sessions respecting the latest positive momentum before hitting resistance at $2.00 and forming a shooting star on the weekly chart, typical range-bound movements near historical lows. Many market participants are starting to believe there is not much to explore on the downside and I think with the warmer summer days this market is finally going to break out in an uptrend as the winter contracts will be trading in larger volumes. We are not there yet.
Traders must remain patient when operating on near term charts. Momentum looks to shift but we need to confirm a change in trend as well. At this point, $1.50 is the only confirmed support level and at the same time, it is a historical low. Eventually, the $2.50 will work as a call level but this is going to be challenging because of the coronavirus crisis. Of course, the developments in oil associated gas will help the price in finding higher ranges but economic comeback will not be even across the states. Lockdowns will only slowly be lifted and consumer behavior, in general, won't be ordinary in the first couple of months.
A recession is underway and will be worse than previously expected. A "U" shape recovery is now the most probable scenario. The supply side may return to normal more smoothly than consumption, which will need considerably more time. In the U.S. the consumer represents more than 68% of total economic growth. On top of that, the Federal government promised to offer financial help to oil producers in various forms. Major banks will also cease assets and will run production through independent entities they have already been setting up in the past few weeks.
I also want to point out that major U.S. Oil and Gas firms were trading 60% to 90% lower y/y even before the crisis. Institutional investors would want to buy on the cheap but decarbonization has been taken into account. Natural Gas is a better-placed fossil but will still have to be well marketed, especially for maintaining its domestic electricity generation production share. EIA confirmed on Thursday a build of 43 Bcf in working underground stocks for the week ended April 23. Stocks are now 63% higher y/y, 20.5% above the 5-year average. EIA expects a decline in stocks by the end of the 2020 refill season. U.S. macro data and the Dollar Index to be closely monitored. We are buying and selling on near term charts. Daily, 4hour, 15min MACD and RSI pointing entry areas.
Natural Gas Chart