Storm Season Volatility Continues for Natural Gas Futures
It’s been a choppy weak for Natural Gas traders, as neither bulls nor bears can seem to take control. Just looking at the past two sessions, we notice prices rising 8.5% on Wednesday, as traders short the market bought back their positions ahead of Hurricane Humberto reaching the Gulf of Mexico. Then on Thursday, when no damage was reported to the Gas installations in the Gulf, prices plunged by 6.4%. Now this morning, prices are up sharply in early trade, as traders look east to find Tropical Strom Ingrid forming. Ingrid is currently about 805 miles east of the Lesser Antilles, and winds are still moderate at 40 mph. However, going into the weekend, traders are fearful of being caught short should the storm start to track towards the Gulf of Mexico. The volatile situation in Natural Gas is more acute this year, due to the rather bearish fundamentals affecting the market. Natural Gas in storage currently totals a hefty 3.069 trillion cubic feet, which is 9.3% above the 5-year average. This has caused large speculators to want to be short Natural Gas futures, with the most recent Commitment of Traders report showing large non-commercial traders holding a net-short position of 75,900 contracts as of September 4th. If a storm were to strike the energy installations in the Gulf and cause serious damage, there is no telling how high prices would climb, as those caught short would have to try to find sellers to cover their positions.
Looking at the daily chart for October Natural Gas, we notice a moderate uptrend in place, despite the recent choppy action. Prices are above the 20-day moving average and are currently flirting with the 50-day average as well. Momentum has started to turn up, with the 14-day RSI reading a fairly strong 62.04. Barring a major storm in the Gulf, $6.785 is seen as the next resistance point for October Natural Gas, with support found at the 20-day moving average, currently at 5.901. In early trade, October Natural Gas is trading at $6.414, up 0.385.
Mike Zarembski, Senior Commodity Analyst
