Natural gas prices continued to break out ahead of Thursday inventory report from the Department of Energy. Prices now reflect the sharp decline in natural gas stocks, and have rallied to the “show me” point.  This comes ahead of the hurricane season, which could generate significant volatility in the natural gas space. Implied volatility on natural gas is relatively low.  The current September implied volatility is 23%, well below the highs of the year which is closer to 40%. The weather is expected to be warmer than normal which should continue to buoy prices. Expectations are that the U.S. will build 43 Bcf of natural gas inventories according to Estimize.

Technicals

Natural gas prices surge another 1.66% on Wednesday ahead of Thursday inventory report.  Prices are poised to test resistance near the June highs at 3.05. Support is seen near the 50-day moving average at 2.87. the 20-day moving average is poised to cross above the 50-day moving average which tells us that a medium term up trend is poised to be in place. Momentum is positive as the MACD (moving average convergence divergence) histogram is printing in the black with an upward sloping trajectory which points to higher prices. The RSI (relative strength index) moved higher with prices action reflecting accelerating positive momentum. The current reading on the RSI is 64, which is on the upper end of the neutral range but below the overbought trigger level of 70.

LNG Exports are Flat

The Energy Information Administration reports that U.S. liquefied natural gas exports were unchanged from the prior week. They report that 6-LNG ships departed the United States from July 26 through August 1. One LNG tanker was loading at Sabine Pass. The EIA also report that in July, a total of 30 LNG cargoes were exported from the United States, 23 cargoes from Sabine Pass, and 7 cargoes from Cove Point. This level is the highest monthly LNG export volume on record since U.S. LNG exports began in February 2016.

This article was originally posted on FX Empire

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