Natural Gas Technical Analysis: The Price is Preparing to Break an Important Support – 14 February 2023
Natural gas futures opened the week in the red, seeing their first drop in three sessions, as weather patterns warmed with forecasts for the next week or so.
Natural gas futures opened the week in the red, seeing their first drop in three sessions, as weather patterns warmed with forecasts for the next week or so. With production nearing recent highs and storage surpluses set to grow in the coming weeks, futures contracts steadied. March gas futures on Nymex on Monday at $2.405 per million British thermal units, down 10.9 cents from Friday’s close, and April futures were down about 10.8 cents at $2.499.
This comes despite an increase in gas flows to Freeport on Monday to 0.5 billion cubic feet per day, the highest level since the facility was first closed due to a fire in June of 2022, in a sign that the plant has begun to liquefy gas.
With only a few days of sharp cooling over the next couple of weeks, the market will likely be looking for clues as to whether the demand situation is picking up. Recent government inventory reports reflected some tightening, but lower production and renewable energy production were also factors.
Regardless, inventories are expected to remain strong and should increase by some estimates to more than 250 billion cubic feet above the five-year average. Inventories on February 3 were about 2,366 billion cubic feet, which is 233 billion cubic feet above levels. A year ago, 117 billion cubic feet higher than the five-year average.
Technically, the main bearish trend dominates the natural gas movement in the medium and short term and along a slope line, as shown in the attached chart for a (daily) period of time. Negative pressure is continuing for its trading below the simple moving average for the previous 50-day period, in addition to that, we notice the arrival of strength indicators Relative to highly overbought areas, exaggerated compared to the price action.
Therefore, our expectations indicate a decline in natural gas during its upcoming trading, especially if it breaks the 2.432 support level, to then target the psychological support level at 2.00.
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