Natural Gas Falls Below $4 On Large Storage Build
???? Fundamentals
The nearly yearlong up-move in Natural Gas prices has started to run into some headwinds of late, as seasonal weather in the U.S. and above average supplies of Gas in storage have sent prices back below $4 per MMBtu.
Front month July Natural Gas futures prices fell to nearly 3-month lows, after the Energy Information Administration reported Gas inventories rose by 111 billion cubic feet (bcf) last week, which was well above the 95 bcf storage build most analysts were expecting. The 5-year average for this time of year is for a 92 bcf build.
June 1st marks the “unofficial” start to the Atlantic hurricane season, which would in the past have caused the market to price-in a “risk premium” in prices due to the potential infrastructure damage to Gas and Oil rigs in the Gulf of Mexico resulting from storm surges.
However, with the advent of hydraulic fracturing or “fracking,” which allowed a greater amount of Gas production to move “inland” and away from dependence on the Gulf for Gas supplies, it appears that the risks of any potential “price spike” in prices due to a pending Hurricane entering the Gulf are becoming more muted, and traders should expect Natural Gas price volatility to remain subdued in the coming months.
???? Technical Notes
Looking at the daily chart for July Natural Gas futures, we notice the sharp sell-off this past Thursday was halted as prices moved close to the 200-day moving average (“MA”). The 14-day RSI has turned weak, but remains above oversold levels, with a current reading of 34.35.
Looking at a Fibonacci retracement from the 2013 lows made back in January to the May 1st highs, we notice the recent sell-off is now approaching the 61.8% retracement at 3.779, which is also the next support level should the 200-day MA fail to stop the recent price decline. Resistance is found at the 20-day MA, currently near the 4.084 price area.
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