FxWirePro: Buy Natural gas at dips and at breakout above $3

The weekly natural gas inventory report will be released at 14:30 GMT today from U.S. Energy Information Administration (EIA). The inventory data has so far revealed that the weekly growth in inventory during the typical injection period, from April to October has been the slowest in more than 5 years. Inventory surprisingly shrank during summer due to extra use of air-conditioning and increased use of natural gas as a source of power generation.

We have already called for a $4.3 per MMBtu natural gas by next year, however, we also expected that price would dip towards $2.4 (revised from original $2.2) per MMBtu before a move higher. However, the natural gas price has already bounced back after finding supports around $2.51 area.

We think that the natural gas has formed a key bottom around $2.5 and may not be back for a revisit. Hence, we are changing our call to ‘buy at dips’ and also after a breakout of $3 area.