Natural gas is still in correction mode, possibly retreating to the Fibonacci retracement levels on the 1-hour chart to draw more buyers out.
The 61.8% level lines up with a former resistance level at $3.720, which might hold as support moving forward. This also lines up with the 200 SMA dynamic support while the 50% level coincides with the 100 SMA at $3.765. The 38.2% level is at $3.811 and might be enough to keep losses in check on a shallow correction.
If that’s the case, natural gas could soon resume the climb to the swing high at $3.959 or higher. Stochastic is still heading lower to signal that sellers have the upper hand, but the oscillator is already nearing the oversold region to reflect exhaustion.
Natural gas is drawing support from seasonal factors, particularly higher temperatures that boost demand for heating commodities. Forecasts of even warmer weather up ahead would likely keep this commodity afloat.
“All of the changes lie in the forecast for next week, as we continue to see models shift hotter in locations from the lower Midwest into the South, especially Texas,” Bespoke Weather Services noted, as it added gas-weighted degree days to its updated 15-day projections.
The upcoming inventory report from the Department of Energy might show a build of 42 Bcf compared to the earlier 55 Bcf increase, confirming stronger demand. An even smaller build or a surprise draw might be bullish for natural gas since this would signal higher purchases and supply that can barely keep up.
On the other hand, a larger than expected increase in stockpiles might suggest a slowdown in purchases, as businesses are wary of potential lockdown measures owing to the Delta variant spread. Risk-off flows stemming from this type of market mood might also weigh on higher-yielding assets like commodities overall.