The Natural Gas Futures facing Downward Pressure

Early Friday trade saw Natural Gas futures continuing to fall as the market digested evidence of a looser supply/demand balance in the latest government inventory data. The September Nymex contract was down 3.9 cents to $3.894/MMBtu at roughly 8:50 a.m. ET, following a 12.6-cent sell-off the previous session.

The Energy Information Administration (EIA) stated on Thursday that the week ending August 6 saw a 49 Bcf injection into US Natural Gas stockpiles, which was in line with market forecasts. The boost was in comparison to a 55 Bcf injection a year ago and a five-year average of 42 Bcf. Tudor, Pickering, Holt & Co. (TPH) analysts ascribed the “whipsaw week/week” to decreased power generation, which was down an estimated 4 Bcf/d to 38 Bcf/d for the most recent EIA report period, citing the considerably leaner 13 Bcf injection reported the week before.

The TPH analysts said, “Warmer-than-average temperatures this week have kept the whipsaw a’ whipsawing, however, as power generation demand has averaged around 43 Bcf/d the past three days — roughly 3.5 Bcf/d above the five-year average.”Renewables generation, led by wind and solar, has achieved seasonal records this week, lowering the amount of power obtained from thermal generation compared to prior highs in late July, according to the firm. Higher wind power has been a major element in the supply/demand balance easing this week, putting downward pressure on Natural Gas prices, said Bespoke Weather Service.

In terms of technicals, ICAP Technical Analysis analyst Brian LaRose warned investors ahead of Friday’s session that bears still have a long way to go to prove the recent dip isn’t just “another tiny bull market correction.” To make a case for a more significant top in this position, we’d need a closure below both $3.902-3.882 and $3.715-3.681. Otherwise, any sideways to downward price action must be treated as corrective.