On Thursday, despite the announcement of a weekly storage of 77 Bcf, the made a strong reversal from the day’s low at $8.123 and tested a high at $8.907 as the weather was cooler than normal across the northern tier, while near to warmer than normal elsewhere.
Friday, the NG started the day at $8.867 and tested a high at $8.989 and a low at $7.960 before closing the day at $7.967. Undoubtedly, there was a steep fall of more than 9% on Friday as the natural gas futures had hit the multi-year peak before facing resistance at the next psychological resistance at $9.
Such high volatility was already expected by NG traders since they found a breakout above the recent peak at $8.063 which was tested on Apr. 18 as most countries were worried about the Russian energy embargo. Since its invasion of Ukraine on Feb. 24, Russia has experienced a plethora of sanctions against it by the rest of the world.
No doubt, the NG futures have been maintaining a steep uptrend after a breakout move above $4.751 on Mar. 21 as the storage phobia had started to deepen and started to overlook the seasonally generated demand for natural gas.
The current uptrend in prices will continue for some more time as the Russia-Ukraine crises continues and the resurgence of COVID-19 cases in the China and other countries could continue to disrupt the global supply chain for a long time.
On the weather front, showers and thunderstorms could continue across the northern US, along with mild to cool overnight lows of the 30s and 40s. The southern US will be warm to hot with highs in the 70s to 90s, including highs near 100°F across Texas Southwest deserts, and the S. Plains this weekend into the start of next week.
Warm conditions will spread across the Great Lakes and MS Valley next week with highs of 70s to near 90°F.
The currently prevailing geopolitical moves, along with these uneven weather patterns, could generate highly volatile moves in natural gas prices.
Technically speaking, NG formed a ‘launching pad’ at $7.407 on the weekly chart. The futures could continue to find massive support at this launching pad due to the thick presence of big bulls still intact.
On the daily chart, if the commodity starts the upcoming week with a gap-up, opening well above the $8.5 level, NG bulls could try to hit the immediate resistance at $9.090 before moving towards $10. And a breakout above this could result in one more short-covering rally during the upcoming week.
On the lower side, natural gas futures could continue to witness a sharp reversal till they hold above the ‘Launching Pad’ at $7.4; only a breakdown below this could open fresh shorts.
Undoubtedly the news flow of further diplomatic moves could continue to generate high waves of volatility, but the overall trend looks to remain favorable for bulls.
Disclaimer: The author of this analysis does not have any position in Natural Gas futures. Readers are advised to take any position at their own risk; as Natural Gas is one of the most liquid commodities of the world.