Natural gas markets have been a bit perplexing this year, due to the fact that the weather forecasts out of the United States have been better than normal. Because of this, warmer than usual temperatures will drive down demand which is a killer for this market due to the fact that natural gas is highly levered to the short-term more than anything else. There is typically a cyclical trade higher during the wintertime, and I think we could see that again. However, at this point in time I do not trust rallies and I think it is time to start fading significant blasts to the upside as we are not that far from trading springtime contract.
NATGAS Video 10.12.20
I would anticipate that we probably go looking towards the 50 day EMA above, which is currently at the $2.784 level. In that area I would expect to see sellers come back into the marketplace and make their presence known, offering another selling opportunity. After all, we probably have “one last hurrah” when it comes to the natural gas markets. Longer-term speaking, we are structurally oversupplied when it comes to natural gas and therefore it makes sense that we will eventually selloff. That being said, I think it is a little early for that to happen because we will almost certainly get some type of cold snap in the United States.
That being the case, it is likely that we will eventually see a rally that we can start selling. I would anticipate that we have probably seen either the high price for the winter, or something very close to it as we approached $3.40.
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