Natural Gas (UNG) Pressing Highs as Technical Trading Trumps Fundamentals
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After dropping 3 percent yesterday, United States Natural Gas Fund, LP (NYSE: UNG) is paring gains in early trading on Thursday. Natural gas futures bounced off resistance near $3.20 per million BTU on Wednesday. The pullback appeared to be profit ahead of EIA inventory data.
For the week ending July 20th, natural gas inventory rose by 26 bcf. This is in-line with a Reuters poll that called for a gain of 26 billion cubic feet. Inventory builds are trending below the average 5-year average, and this has helped to ease fears of a supply gut.
The longer-term fundamental story for natural gas is that it is a "patriotic domestic fuel source". Proponents say consumption of natural gas creates jobs in the U.S. and limits dependence on foreign imports. While that may be true, in the near term traders are focused on warmer temperatures and it is the main factor driving higher prices.
Fundamentally natural gas prices above $3.00 do not appear sustainable given the higher than normal total amount of storage. This combined with the potential for cooler temperatures and the possibility that power companies could swap back into coal create risks for natural gas. However, technically natural gas is trading with a very bullish tone, and this trend may not be easy to reverse.
United States Natural Gas Fund, LP (NYSE: UNG) is higher by 1.3 percent at 21.17 early on Thursday. Natural gas futures trade near $3.10.
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For the week ending July 20th, natural gas inventory rose by 26 bcf. This is in-line with a Reuters poll that called for a gain of 26 billion cubic feet. Inventory builds are trending below the average 5-year average, and this has helped to ease fears of a supply gut.
The longer-term fundamental story for natural gas is that it is a "patriotic domestic fuel source". Proponents say consumption of natural gas creates jobs in the U.S. and limits dependence on foreign imports. While that may be true, in the near term traders are focused on warmer temperatures and it is the main factor driving higher prices.
Fundamentally natural gas prices above $3.00 do not appear sustainable given the higher than normal total amount of storage. This combined with the potential for cooler temperatures and the possibility that power companies could swap back into coal create risks for natural gas. However, technically natural gas is trading with a very bullish tone, and this trend may not be easy to reverse.
United States Natural Gas Fund, LP (NYSE: UNG) is higher by 1.3 percent at 21.17 early on Thursday. Natural gas futures trade near $3.10.
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