Longs Favoured On Natural Gas As Weak USD, Strong Demand Data Supports

According to a report released earlier today, US demand for airconditioning is lower this year, relative to last year, but overall consumption levels remain strong.  The demand is much higher than the long-run average so far this year, coming in with a differential of 30 Bcf on weekly injection figures, due to rising temperatures all over the world.

Average consumption for the week ending on June 15, as estimated by the PointLogic, rose by 2%. Demand was driven by an increase of 5% in consumption of natural gas for electric power generation, which offset a fall of 2% in the residential and commercial sectors.

Meanwhile, on the supply side, according to Baker Hughes, the natural gas rig count in the US rose by 3 in the week ending on June 10, raise the total number of rigs to  85. The Energy Information Administration (EIA) on June 07 also predicted that US production of natural gas is likely to surpass domestic consumption soon.

Early last week, data from China showed that Chinese natural gas output increased at an annualized rate of 4.3% in May, to 10.8 billion cubic meters

For the last several days, the US dollar has plunged significantly, due to dovish comments from the Federal Reserve Bank on rate hikes and the overall economy. Concluding remarks from the FED’s June meeting indicated that the central bank would not raise the benchmark rate this summer and no accurate timing for another rate hike was indicated. James Bullard, a voting member of the FOMC also commented on Friday that the odds of increasing interest rates this year were pretty low as most key economic indicators were only around acceptable levels.

The dollar index DXY, which measures the strength of the greenback against a basket of its rivals, declined to 93.68 in today’s trading session, far below the last close of 94.32.

Currently, investors are turning their focus onto the “Brexit” referendum on June 23, which may create significant volatility and uncertainty in the global markets for most of this week.

nat d1

Fig. NAT.GAS D1 Technical Chart

Natural gas opened this week with a small gap-up, extending its up-move from the bottom of 1.663, which was formed on March 04. ADX (14) is heading up to the level of 53.2271 with a large distance between DI+ and DI-, indicating that the bullish power is very strong. A long position on this commodity is signaled by the trend indicator.

Trade suggestion

Buy stop at 2.745, Stop loss at 2.614, Take profit at 2.876

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