Natural Gas Technical Analysis
The natural gas market dropped pretty significantly during the early part of the trading session on Friday, as traders continue to push this market back and forth in a relatively well-defined range. The $3 level above is a significant resistance barrier, while the $2.80 region is significant support.
Demand and Supply Balance
The shoulder season is basically when we are between periods of high demand, so there will not be as much demand for air conditioning, and there is not enough demand for heating. Demand drops in this environment and keeps the price down.
The supply situation in the United States is still 5% over the five-year moving average of storage, as it were, so we still have plenty of natural gas. This winter, and as we roll into the November contract at the end of the year, we will start to focus on situations involving the Europeans and whether or not they will be forced to buy more natural gas from the Americans. That might help pull down some of that supply that we see overhanging the ability for the market to rise over time.
I am typically bullish in the winter. We just are not there quite yet, so we are in this somewhat lackluster, range-bound market, which I suspect could very well remain the case heading into next week as well. This is a market that will be looking for some kind of confidence in a momentum-driven move.
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