Natural Gas Futures (NYMEX: NG) have faced a challenging streak, eyeing a seventh consecutive week in negative territory.
Recent trading saw natural gas futures initially climbing before settling lower, influenced by weather forecasts signalling subdued heating demand for the upcoming weeks. Forecasters anticipate a lack of subfreezing temperatures across the U.S., denting demand further.
Market attention now turns to the EIA’s forthcoming weekly storage report, with an anticipated 84 Bcf draw expected, underscoring weakening inventories. Last week witnessed a significant 10% plummet in U.S. natural gas futures, triggered by excessive inventories and forecasts suggesting minimal demand due to warmer weather projections, intensifying concerns about surplus supply and diminishing demand.
Technical
The Natural Gas Futures exhibit a prevailing downtrend, positioned below the 100-day moving average, signalling a challenging market landscape. A notable resistance level recently emerged at $2.757 MMBtu, culminating in a sharp downturn. Counterbalancing this decline, a crucial support base surfaced at the $2.235 MMBtu level, catalysing a reversal driven by oversold Relative Strength Index (RSI) conditions.
Consequently, the natural gas futures converged with the 100-day moving average, coinciding with the 61.80% Fibonacci Retracement Golden Ratio. This convergence, however, encountered resistance at this significant Golden Ratio level, impeding further upward movement in the futures market. A potential retest of this level looms should a resurgence in bullish momentum materialise. Conversely, a resurgence of downward pressure could bring the $2.235 MMBtu level back into focus as a pivotal support level.
Summary
Natural Gas Futures face persistent challenges amidst subdued heating demand and surplus supply concerns. The downtrend, below the 100-day moving average, signals a volatile market. The resistance at $2.757 MMBtu and support at $2.235 MMBtu mark crucial points. Market sentiment remains vulnerable, awaiting demand signals amid weather forecasts and inventory reports.
Sources: Reuters, TradingView
Piece Written By Nkosilathi Dube, Trive Financial Market Analyst
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