Through the first third of this year, the only commodity market that was uglier for the bulls than natural gas was sugar.
As of April, the Nymex gas contract was down 32.2% on the S&P GSCI. That was certainly better when compared to New York sugar, down 42.2%, but it was more than twice as bad as the third worst performing market, Chicago corn, which was down by only 14.1% through the first four months of this year.
However, whereas sugar remains mired in a bear market, i.e. down another 6.3% last month and down 45.8% on the year, natural gas lead the entire S&P GSCI in May by posting a 10.1% return. As such, the contract was able to leapfrog the lead and zinc markets and move ahead into the fourth spot from the bottom, down 25.1% year-to-date.
- NatGas & Other Energy Futures
- Sugar & 'Soft' Commodities Futures
Given the technical picture that has recently developed, the table appears set for further gains in this market.
For starters, we fully acknowledge how bearish the fundamental picture appears. E.g., gas is currently getting injected into underground reserves at a blistering 9.3 Bcf/d pace and the latest monthly production figures from the DOE failed to support the notion that producers are ready, willing and able to scale back output below $4. Rather, Lower 48 production in March rose 1.3% to a record 64.7 Bcf/d. Furthermore, the AMEX natural gas index is still technically weak.
Be that as it may, last week spot Nymex Henry Hub futures traded up through and closed above (positively sloped) 14, 30 and 50 day moving averages. What’s more, as of Friday the RSI, 58.1, was also sloped to the upside. These are indeed bullish events, but with one caveat… volume was very weak last week.
Nevertheless, here at The Schork Report we remain cautiously bullish in gas as we approach the dog days of summer.
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Stephen Schork is the Editor of The Schork Reportand has more than 17 years experience in physical commodity and derivatives trading, risk systems modeling and structured commodity finance.