Natural Gas: Selling Rallies On Exhaustion

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Natural Gas futures on the Nymex had a volatile week before closing 0,8% higher than the previous one at $2.50. EIA reported on Thursday a withdrawal of 87 Bcf in working underground storage for the week ended December 22. Total inventory is currently at 3,490 Bcf, 11,1% higher y/y, 10% above the 5-year average. Βoth percentages are on the rise in the beginning of this withdrawal season.Who remembers those $1s contracts from 2020? We had been looking at a seasonal ceiling in the past couple of months, we could not even reach $3.00 on a bounce for the past few weeks in favor of the winter contracts. We started selling any rally on exhaustion on the near-term charts after having placed on time our Put positions for the coming shoulder season. We now need to find another entry level a little bit higher from the current mid $2s but this is a bit difficult as the pace of reduction in working underground storage is not fast enough. Total inventory remains close to the 5-year maximum.With the results of the COP28, something that I have been warning about for several years is now becoming apparent. Natural gas is losing its appeal, as it will not be the so important bridge fuel we all expected ten years ago. Of course there will still be essential uses for it, especially if it cooperates well with Hydrogen in the future. Another controversial scenario however. But in any case, it remains the big loser in power generation, the most precious market for the U.S., as renewables and nuclear will become even more important and competitive for this sector.During the so-called energy crisis of the start of Putin’s war against Ukraine, I was explaining how wrong most of the market participants were at the time about natural gas pricing and all the artificial excuses of profiteering. From producers and shipowners, to processing plants and trading offices, the surge in prices prompted buyers and politicians to look for alternatives. The only marketing tool left for natural gas, pure methane, is its pricing. No one would eat bad food if it didn’t cost only a dollar a piece.All of us involved in Energy must understand how important an industry it is for human livelihood. No one can sell and compete with such important commodities as if it were socks or cuff links. From $8.00 in May 2022, we predicted $3.50 for April 2023. The price went to $2.20 and it could not even bounce back to $3.00 in the past spring, when six months before, most people wanted natural gas at $15. Such a dream they had at the time. Putin’s friends and collaborators, to make in natural gas what they are going to be losing in crude oil because of this war and because of the energy transition in the next couple of decades.U.S. macro data and the Dollar against majors must be routinely monitored. Daily, 4hour, 15min MACD and RSI are pointing to entry areas.Happy New Year! More By This Author:Natural Gas: Looking At A Seasonal Ceiling
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