NG: UNG: BOIL: Natural Gas Chart Forming a Top?
Bullish factors: NG Natural gas price has been rallying for the past month reaching $2.5 level on increased consumption during summer months, improving LNG flows reaching 5.1 bcf/d in mid-August, and two tropical storms in the Gulf area threatening natural gas production. The fundamentals remain bullish going into mid September.
Bearish factors: Production is steady at about 92 bcf/day, while consumption has been declining to 83 bcf/day lately on cooling temperatures. Two tropical storms, Marco and Laura, are not expected to produce substantial disruption to natural gas production, but may produce loss in demand due to cooling temperatures and power outages.
Technical analysis: Divergence between price and volume is pointing toward a potential top. On a daily chart , RSI is above 70, approaching overbought territory. We have an unclosed gap at $2.77 level, which may be the next top.
National demand is expected to be cooling going into September. Overall demand will be driven largely by LNG exports, which are expected to remain steady at around 5 bcf/day, 10-20% below levels seen in the fall of 2019. The forward curve seems to be pricing in a more robust recovery in demand than actually observed.
Bearish factors: Production is steady at about 92 bcf/day, while consumption has been declining to 83 bcf/day lately on cooling temperatures. Two tropical storms, Marco and Laura, are not expected to produce substantial disruption to natural gas production, but may produce loss in demand due to cooling temperatures and power outages.
Technical analysis: Divergence between price and volume is pointing toward a potential top. On a daily chart , RSI is above 70, approaching overbought territory. We have an unclosed gap at $2.77 level, which may be the next top.
National demand is expected to be cooling going into September. Overall demand will be driven largely by LNG exports, which are expected to remain steady at around 5 bcf/day, 10-20% below levels seen in the fall of 2019. The forward curve seems to be pricing in a more robust recovery in demand than actually observed.
Comment:
Hurricane Laura update: strengthening into grade 4. Demand destruction is currently projected to be more significant than previously expected. Supply destruction will also be significant, but counteracted by longer lasting damage to demand.