Crude oil moved sharply lower Wednesday after reports that Middle East peace negotiations were entering later stages. That headline triggered a broad selloff across energy markets and June natural gas futures followed.
When oil drops hard on peace signals the energy complex sells off together and natural gas does not get a pass just because its own fundamentals are mixed. The geopolitical risk premium that had been providing a background bid across all energy markets started leaking out Wednesday and natural gas absorbed part of that exit.
What I’m Watching
The Middle East peace signals that pushed crude oil lower Wednesday are the fundamental development that changes the near-term picture for June natural gas futures. Lower oil reduces the inflation fear that has been keeping a bid under the entire energy complex.
A trade through $2.985 confirms the closing price reversal top and opens the door to the 50-day moving average at $2.923. Lose that and the retracement zone at $2.865 to $2.800 becomes the next test.
The Energy Information Administration storage report Thursday is the event that either confirms the bearish setup or gives buyers a reason to step back in. A build at 96 to 98 billion cubic feet and the bears have everything they need. A miss to the downside and the reversal top gets challenged fast.
More Information in our Economic Calendar.
