Natural Gas Hit Predicted Level, What Next?

Natural gas futures posted their biggest weekly gain since 27th February 2023 last week. The gas prices jumped near to two months high on the back of what some sensed. Despite its supply glut, the fundamentals for the fuel are improving.

However, prices gave up their earlier gains and retreated more than 7% yesterday. Amid ample U.S. supplies and a cooler U.S. weather forecast. As a result, the need for electricity to power air conditioning will decline.

Nat-gas inventories in the U.S. were +17.8% above their 5-year seasonal average as of May 12. Through May 31, the southern and eastern United States are expected to experience normal to below-average temperatures according to the Commodity Weather Group. Monday’s 23-month low in European natural gas prices had an impact on U.S. natural gas prices as well.

The MCX Natural gas May Future settled at 214.30 virtually up 13.21% on a weekly basis.

Gas futures are still down more than 40% on the year despite the recent ‘rebound’. A result of the problems that have built up since the fourth quarter of 2022.

The surge in petrol prices is the result of what some perceived to be strengthening fundamentals for the fuel despite the glut in supply.

According to the Energy Information Administration, last week saw a 99 billion cubic feet (bcf) increase in U.S. natural gas storage. EIA announced a smaller-than-expected build on Thursday, which helped the market’s attitude since it needs to see less stockpile growth and greater demand.
In comparison to the 78-bcf increase from the week prior, petrol inventories increased during the week ending May 12.

This week, Natural Gas Storage will be released on Thursday. It will have a strong impact on the prices.

Technical Outlook

As per the outlook given on 17 May 2023, after breaching the resistance of 201.50, natural gas prices hit both predicted levels of 210-215. It made a weekly high of 222.70 and settled at 214.30 with a weekly gain of 13.21%, the biggest gain since 27 February 2023.

However, prices retreated from the high of 212.70 and traded at 203.10 levels again.

On the above daily chart, prices failed to hold their earlier gains and formed a long bearish candlestick. However, prices are still trading above their massive resistance of 201.50.

In the near future, trends are expected to remain under the consolidation zone, as, after the drastic fall since November 2022, prices may hold above 162.50 on a closing basis. Any dip towards 190-185 will give a buying opportunity for an upside level of 210-220 again.

On the downside, 180.00 serves as immediate support; a breach below that level would likely result in a decline back below 165.00.

Only a break below 162.50 will change the trend, and Natural gas falls drastically, as it’s a highly volatile commodity, and anything could expect from this.