Natural Gas Price Analysis – Natural Gas Continues to Look Weak

Natural Gas Technical Analysis

The natural gas markets continue to be somewhat noisy, but in general, I think what we’re seeing is rotation around the $3 level. The $3 level of course is psychologically significant and important, and I do think a lot of people will continue to watch it.

The $2.80 level underneath is support, while the $3.20 level is resistance. Ultimately, there is a major problem with the natural gas market as far as pricing is concerned, given the fact that we have a lot of questions about whether or not there will be enough demand. This is a situation where a lot of people will be looking at this as an oversupplied market.

Supply Constraints and External Shocks

The time of year is not very conducive to the price rise, although we do have external shocks in the form of the Middle East and some of its supply being threatened. As long as that is the case, it probably provides a bit of a floor, but at the end of the day, this is a US contract, and it is US weather that drives the majority of movement.

Next winter, there’s a very real world in which natural gas rises a bit more than it typically does, as Europeans may be forced to import some. Qatar has suggested that the full capacity probably won’t be online for a couple of years. This is a longer-term story, but short-term, if natural gas rises anywhere near $3.20, I’m more than willing to fade the first signs of weakness. This is a market that I have no interest in trying to buy anytime soon.

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