It has been difficult to be a Natural Gas bull for most of 2015
Large speculators have been reducing their net-short position in Natural Gas futures of late, but still hold a sizable short position according to the most recent Commitment of Traders report.
During the reporting period ending June 16th, non-commercial traders reduced their net-short position by over 23,500 contracts to 239,488. Commercial traders were mainly on the other side of this trade, reducing their net-long position by over 25,700 contracts. Small speculators added over 2,100 new net-long positions during this time period.?
Fundamentals
It has been difficult to be a Natural Gas bull for most of 2015, as ample stockpiles combined with increased production, despite a decline in Gas drilling rigs, has kept rally attempts in check. However, a recent increase in Gas usage for power generation has led to Gas storage builds that were below expectations the past few weeks, which in turn allowed Natural Gas prices to post a nearly 8% gain so far this month. On Thursday, the Energy Information Administration (EIA) reported that 75 billion cubic feet (bcf) of Gas were placed in storage last week. This was 3 bcf below analysts? expectations and the smallest build since early April. Above normal summer temperatures, especially in the west, have caused a sharp increase in power usage which, in turn, has increased the commercial demand for Natural Gas in June. How far prices may rally could be in control of Mother Nature and to what extent above normal temperatures will spread throughout the lower 48 as we move into the heart of summer in July and August. However, if temperatures turn to more ?normal? levels for most of the nation, it will become increasingly difficult for Gas prices to rally much beyond 3.000 given current production levels.?
Technical Notes
Looking at the daily chart for lead month August Natural Gas futures, we notice that outside of the month of May, where we saw a bit of a spike in price volatility, the market has been rather tame for most of 2015, with prices spending the majority of the time between 2.750 and 3.000. The 20- and 200-day moving averages (MA) are portraying a mixed picture as to the direction of the market, with prices currently trading above the short-term 20-day MA, but still well below the longer-term 200-day MA. The 14-day RSI confirms this lack of a distinct trend, with a reading of a very neutral 52.96. Support for the August futures is seen at 2.570, with resistance found at 3.167.?
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