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Natural Gas Technical Analysis: Price Consolidates its Gains

US natural gas futures rose for a second straight session on Wednesday, following crude’s rally, and moving further away from the 12-week low touched earlier in the week.

Spot natural gas prices (CFDS ON NATURAL GAS) increased in the last trading at the intraday levels, to achieve new daily gains until the moment of writing this report, by 1.96%. It settled at the price of $6.976 per million British thermal units, after its progress during yesterday’s trading and for the second day on respectively, by 1.51%.

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US natural gas futures rose for a second straight session on Wednesday, following crude’s rally, and moving further away from the 12-week low touched earlier in the week.

Futures contracts for November delivery rose 9.3 cents, or 1.4%, to settle at $6.930 per million British thermal units (mmBtu). While natural gas was traded at about $47 per million British thermal units in Europe, and at $38 in Asia.

Meanwhile, the head of the International Energy Agency said on Wednesday that Europe may face a more severe energy crisis next year after natural gas stocks dwindle to weather the winter cold. This happened despite the European Union looks for ways to ease the crisis.

And Bloomberg Agency reported on Wednesday that the decline in natural gas prices in Europe yesterday is due to the announcement by the Russian gas company Gazprom to resume its supplies to Italy through Al-Namas.

Based on estimates provided to Bloomberg early Wednesday, forecasts center around an injection of 95 billion cubic feet to 129 billion cubic feet in the US Energy Information Administration’s (EIA) weekly inventory report. This covers net changes in natural gas inventories in the United States during the week ending September 30.

In the same period last year, EIA data recorded an injection of 114 billion cubic feet, while the five-year average is 87 billion cubic feet.

Natural Gas Technical Analysis

  • Technically, natural gas finds some support from the continuation of positive signals in the relative strength indicators, after it gained positive momentum from its base at the pivotal support level 6.338 earlier.
  • This was shown in the attached chart for a (daily) period, but despite that, this rise aims to compensate part of what it incurred from previous losses, considering its being affected by a negative technical structure formed in the short term, which is the head and shoulders pattern.
  • Negative pressure continued affecting trading below the simple moving average for the previous 50 days.

Therefore, our expectations suggest a return to the decline in natural gas during its upcoming trading, to target once again the 6.338 support level.

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