Bulls Ran Out of Gas!
Natural Gas futures have been solidly in the bear camp of late, with the lead month September contract hitting 10-month lows. This week was particularly hard on prices, especially after Hurricane Dean missed the Oil and Gas producing areas of the U.S. Gulf Coast, and traders who previously bought back their short positions ahead of Dean are now re-establishing their positions as prices continue to plummet. Current Gas in storage is approaching 3 trillion cubic feet (tcf) – currently standing at 2.903 tcf – and traders will be looking for another 30 bcf to have been added last week when the weekly EIA gas storage figures are released at 9:30 AM Chicago time. With Gas storage levels nearly 15% above the 5-year average and the summer cooling season starting to wind down, it appears we may have a record amount of Gas in storage to begin the winter heating season. Traders should be cautious, however, as we are still in the prime of the Atlantic hurricane season, and even the threat of a storm reaching the U.S. Gulf Coast can spur a sharp short-covering rally and result in quick volatility spikes.
Looking at the daily chart for October Natural Gas futures, we notice a modest bounce this morning, as higher Crude Oil prices and some minor short covering buying ahead of today’s Gas storage report is supporting prices. However, the market remains well below the major moving averages, and momentum is weak. The 14-day RSI has reached oversold territory with a reading of 25.22. The next support point for October Natural Gas is seen at $5.750, with major support found at $5.50. Resistance is seen at the 20-day moving average near $6.560. In the early going, October Natural Gas is trading at $5.844, up $0.024.
Mike Zarembski, Senior Commodity Analyst
