Natural Gas Surges but Prices are Overbought

Key Insights

• Natural gas prices surged.
• Natural gas delivered to LNG export terminals continued to rise.
• European sanctions on Russia make U.S. gas more attractive.

On Monday, natural gas prices rallied above $8 per MMBtu and were front and center on business channels. Natural gas prices hit a 13-year and closed near the day’s highs. LNG demand remains strong, and natural gas arrivals at LNG terminals rebounded to 12.74 Bcf per day.

According to the National Oceanic Atmospheric Administration, the weather is expected to be warmer than normal on the East Coast. Then the temperature will turn cooler during the next 8-14 days.

Technical Analysis

Natural gas prices surged above $8 and were up 10% intra-day while hitting a 13-year high. Prices rose nearly 16% last week.  Target resistance is seen near the July 2008 highs at 13.68. Support is seen near the 10-day moving average at 6.37. The entire curve to the end of 2022 is now close to $8 per MMBtu.

Short-term momentum has reversed and turned positive as the fast stochastic generated a crossover buy signal. Prices are overbought. The fast stochastic is printing a reading of 95, above the overbought trigger level of 80. Additionally, the RSI is printing a reading of 87, above the overbought trigger level of 70.

Medium-term momentum has turned positive. The MACD (moving average convergence divergence) histogram is printing in positive territory with an upward sloping trajectory which points to an acceleration in the underlying price of natural gas.