Natural Gas Price Analysis – Natural Gas Continues to Look Soft

Natural Gas Technical Analysis

The natural gas markets have fallen a bit during the early hours on Thursday as we continue to see a lack of demand be a major issue. The risk appetite out there is a little bit off as well, so I think you’ve got a situation where traders are going to be looking at this as a market that continues to drift lower due to the fact that temperatures in the United States are comfortable right now.

The next support level, at least from a psychological and structural standpoint, is $2.50. If we rally from here, the $3 level is your ceiling, and I would love to short natural gas near that area as the 50-day EMA is currently hanging around there as well. Anything above there would be a bonus because it just means I would get to short natural gas from an even higher level.

Abundant Supply and Storage Dynamics

Most traders don’t understand that this is a U.S. contract that I talk to at least, and they are a bit surprised that it’s as higher than it is. In fact, the chart looks downright miserable. That’s because natural gas is so abundant in the United States that we could power the rest of the world for 300 years using just the natural gas that we know of. Canada has even more.

With that being the case, natural gas is not an abundant commodity. It really comes down to how much is in storage and as not much is being drawn down from storage at the moment, there is more than enough to deal with any demand, thereby driving this into a very bearish market.

If you’d like to know more about how to trade natural gas, please visit our educational area.