Natural Gas Market on the Nymex faced a wild week on spectacular volatility. Friday closed 8.70% higher than the week earlier at $4.36. On Wednesday we saw a top blowing off and sold on exhaustion the very next day, forming a shooting star. Price is already 40% higher than a year ago and heating fuel 25% to 30% costlier in many areas of the U.S. Too many conflicting reports about coming winter’s weather models and shallow underground working stocks at the end of the refill season, spur a little bit of panic besides true investing ideas. Trading volumes practically quadrupled these last few trading sessions, while majors are taking advantage of volatility and hedging for their customers and portfolios. Vigorous swings are typical while seasonality is being integrated. Many analysts out there tend to forget that the main reason Henry Hub’s futures and options are exchangeable is for producers and market participants to be able to hedge and manage risk precisely on volatile price gaps, even between different natural gas hubs. Reports coming from London’s IEA summit confirming China’s appetite for natural gas, while global demand growth by 45% in the next decade and rising U.S. NG exports are also driving the price since the beginning of summer. Of course U.S. production remains at record high and can keep pace with rising demand, as coal to natural gas conversion is ongoing. Thursday’s storage report showed a 39 Bcf build, as total stocks remain 16% lower than the 5year average. Demand will remain very high for the coming week on a colder oscillation block across the Lower 48. Trading the short term for quite some time, we would like to see a change in trend, on the daily MACD, before selling again. Until then, we stay vigilant asking for buying signals on the short term charts. Dimitris Kontoulis.
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