Natural Gas Technical Analysis: The Price is Erasing Previous Gains – 06 March 2023
Natural gas futures rose on Friday for the fourth day of the week and for the seventh time in eight sessions, supported by expectations of increased heating demand at a time when production is declining.
Natural gas futures rose on Friday for the fourth day of the week and for the seventh time in eight sessions, supported by expectations of increased heating demand at a time when production is declining. April natural gas futures settled in Nymex at $ 3.009 per million British thermal units. , up 24.4 cents on the day, and the May contract rose 24.2 cents to $3,141.
Production averaged about 100 billion cubic feet per day during the last week of February, according to Bloomberg data, but fell to about 98 billion cubic feet per day in early March.
Production evolved after the seasonally mild winter conditions throughout the eastern half of the country in January and February. These conditions curbed national gas demand and pushed prices down for the first two months of the year, spurring exploration and production companies to start cutting back.
This comes after the US Energy Information Administration (EIA) reported the withdrawal of 81 billion cubic feet of natural gas storage facilities in the US for the week ending February 24. Withdrawals were well below the five-year average of 134 billion cubic feet. Total operating gas in the southern 48 states in underground storage was 2,114 bcf, which is 342 bcf more than the five-year average, according to the Energy Information Administration.
Meanwhile, China’s decision to set a modest 5% economic growth target for 2023 put some pressure on commodity markets, which had been anticipating an increase in demand from the world’s largest buyer of natural resources. The 5% target was set on Sunday as China kicked off its annual session of the council. National People’s Congress, where outgoing Premier Li Keqiang stressed the need to enhance economic stability and boost consumption.
Technically, the price faced negative pressure after it touched the resistance of its simple moving average for the previous 50-day period, in light of the dominance of the main bearish trend in the medium term along a trend line. This is shown in the attached chart for a period (daily), in addition to that, we notice the start of negative signals, with relative strength indicators, after reaching highly overbought areas. This increases negative pressures on the price.
Therefore, our expectations indicate a further decline for natural gas during its upcoming trading, especially in the event that it stabilizes again below the level of 2.748, to then target the pivotal and psychological support level of 2.00.