Trader’s Squeeze Prompt Natural Gas to Fresh Decade Highs

 Natural gas prices surged higher on Thursday in the wake of an inventory report from the U.S. Energy Department. Traders in the Gulf were purchasing spot gas to use for LNG for the energy needs of the Europeans. On Thursday, traders created a massive short-squeeze for front-month natural gas, which moved off the board. March natural gas was only up 2%. The Weather in the U.S. is expected to be warmer than normal for the next 6-10 days but turning cooler than average over the next 8-14 days.

 Technical Analysis

On Thursday, natural gas prices surged higher, breaking out. The continuation contract will show that front-month prices surged higher, reaching the year’s highs. Support is seen near the 200-day moving average on the March contract at 4.08. Medium-term momentum is positive as the MACD (moving average convergence divergence) histogram is printing in positive territory with an accelerating trajectory which points to higher prices.

Inventories Decline in Line with Expectations

According to EIA estimates, natural gas in storage was 2,591 Bcf as of Friday, January 21, 2022. This represents a net decrease of 219 Bcf from the previous week. Expectations were for a 217 Bcf draw, according to survey provider Estimize. Stocks were 308 Bcf less than last year at this time and 25 Bcf below the five-year average of 2,616 Bcf. At 2,591 Bcf, the total working gas is within the five-year historical range.