May 30th, 2024

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Natural Gas and Crude Oil

from ChartWorks:: published by Institutional Advisors

Bob Hoye
Technical observations of
March 18th, 2007

This week’s natural gas drawdown of 102 Bcf brings the inventory level to 1,631 Bcf.

Working Gas in Underground Storage
(First week in March marked with red diamond)

Inventories are now down 72% from the highs and in line with average drawdowns for early March. Prices should have their normal peak in April, as the inventories bottom out. From there look for a 40% to 60% retracement into a June-July low. Longer-term, the models look exceptionally bullish with a new 21-month high being the norm by the end of the year.

As can be seen on the following chart from Moore Research (, we are in a stretch of three months where the gas market has a tendency rally in both bull and bear market years.

Stocks in the group are influenced by the prices of natural gas, crude oil and the equity markets. The following chart shows how well a composite of the three continues to track the Natural Gas Index (XNG). Unless a divergence develops we will look for a continued advance into April.

Crude oil has generated overbought readings in our summation index. These are usually seen going into a seasonal high. However, it seems a little early. When prices are below the 50-week moving average or the average is in a downtrend the seasonal high has occurred in the mid-April to mid-May time frame. Additionally, the price has a tendency to test the 50-week average (currently $65.77) from the lower side before its move into a late-June to July low.

While the energy stocks have underperformed on the rally from the January 18th low there should be a decent selling opportunity as we move into April.

The opinions in this report are solely those of the author. The information herein was obtained from various sources; however we do not guarantee its accuracy or completeness. This research report is prepared for general circulation and is circulated for general information only. It does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. Investors should seek financial advice regarding the appropriateness of investing in any securities or investment strategies discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. Investors should note that income from such securities, if any, may fluctuate and that each security’s price or value may rise or fall. Accordingly, investors may receive back less than originally invested. Past performance is not necessarily a guide to future performance.

Neither the information nor any opinion expressed constitutes an offer to buy or sell any securities or options or futures contracts. Foreign currency rates of exchange may adversely affect the value, price or income of any security or related investment mentioned in this report. In addition, investors in securities such as ADRs, whose values are influenced by the currency of the underlying security, effectively assume currency risk.

Moreover, from time to time, members of the Institutional Advisors team may be long or short positions discussed in our publications.


Bob Hoye
March 18th, 2007


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