Natural gas is trending lower and seems to be hitting resistance at the descending trend line. Price could resume the drop from here and the Fib extension levels could serve as the downside targets.
The 100 SMA is below the longer-term 200 SMA to indicate that the path of least resistance is to the downside. In other words, the selloff is more likely to gain traction than to reverse. However, price is already trading above the 100 SMA dynamic inflection point as an early indication of bullish pressure.
Still, if resistance holds, the commodity could resume the slide to the 38.2% extension around $2.100 or the 50% level at the swing low. Sustained selling pressure could take it down to the 61.8% level at $2.020 or the 78.6% level at $1.969. The full extension is located at the $1.903 mark.
RSI is already turning lower without even hitting the overbought region, indicating that sellers are ready to return. Stochastic is also turning lower after recently reaching the overbought zone, reflecting a return in selling momentum.
Natural gas is slightly higher leading up to the release of the inventory data, but traders seem to be bracing themselves for higher production numbers. This could mean a huge glut, especially since demand is typically weaker around this time of the year.
Although risk appetite has improved somewhat, trade tensions linger and would likely keep a lid on commodity price gains. Recall that Trump announced another set of tariffs on China, thereby weakening business sentiment and demand for energy assets.
Still, a large draw in inventories could mean that demand remains healthy or that production has been able to adjust. The EIA forecasts that US dry natural gas production will average 91.0 billion cubic feet per day in 2019, up 7.6 Bcf per day from 2018. It also expects monthly average natural gas production to grow in late 2019.