Henry Hub Natural Gas futures for November (NGX20) have been volatile for the month of September. Prices were elevated near the $3.00 mark to start the month, only to rapidly decline to $2.50 by mid-month. Reports of supply disruptions last week and a bullish EIA storage report provided fuel for natural gas bulls to push prices nearly 13% in two days.
Tropical storm Beta has brought flooding to major natural gas hubs in the gulf region. Beta made landfall late Monday in Texas, by Wednesday the storm was downgraded to a post-tropical cyclone. Reports indicate deliveries of feed gas are temporally disrupted due to flooding in the region, resulting in higher prices last Wednesday.
In further support of bullish price action was the EIA storage report released Thursday morning. Analysts were expecting an injection of 75 Bcf, continuing the build in storage from the previous two weeks, the week ending Sept 11 saw injections of 70 Bcf, and the week ending Sept 18 injections of 89 Bcf. However, bulls were encouraged by a lower than expected injection of 66 Bcf, making total storage 3,680 Bcf. This reading is even bullish as compared to last year’s reading when the EIA reported an injection of 97 Bcf for the same week. The five year average for the week was 80 Bcf.
If injections continue to come in on the low end of estimates traders may expect higher prices as stores may not be enough to supply a cold winter. However, injections into storage so far this injection season (ending in October) are 6% higher than the five-year average. If the rate of injections into storage matched the five-year average for the remainder of the injection season, total natural gas inventory would be 4,130 Bcf, 407 Bcf higher than the five-year average of 3,723 Bcf.
On the demand side total U.S. natural gas consumption rose by 1.0% compared to the previous week. Natural gas consumed by the residential and commercial sectors increased by 27.9%, industrial consumption increased by 2.3% week over week, and power generation declined by 6.7% week over week.
As much of the lower 48 enjoyed cooler weather last week cooling demand moderated. However, some weather analysts are expecting colder weather in many parts of the eastern half of the country this week, potentially increasing demand for natural gas as residents and business turn on furnaces for the first time this season.
Looking at the price action for Henry Hub Natural Gas for November (NGX20) we can see the price action is volatile of late. As of Friday’s close prices were above all three key moving averages (the 200, 50, and 20 Day-SMA’s).
The RSI (a measure of momentum) has moved higher along with the price action. As of Friday’s close the RSI posted a reading of 52%, off the low reading mid-month of 33%
Traders may want to look to the 20 Day-SMA of $2.80 as short term support and, and the $2.90 and $2.96 beyond as potential resistance.
20-Day SMA 2.80
50-Day SMA 2.69
200-Day SMA 2.44
14 Day RSI 52