Natural Gas Price Analysis – Natural Gas Continues to Struggle at Lows

Natural Gas Technical Analysis

The natural gas market was very choppy during the trading session early on Tuesday and the $2.80 level is an area that I think continues to be somewhat supported, probably followed by the $2.75 level. The market bouncing from here could open up a move to the $3.00 level, which, of course, is a major area of contention, probably in the options market just as much as it is the spot market.

But at the end of the day, one of the things that is obvious here is that the natural gas market is in a season of low demand as temperatures are very mild in the United States right now and that of course continues to put downward pressure. I don’t have any interest in buying natural gas and quite frankly, if it rallies, it’s a selling opportunity.

Supply Abundance and Seasonal Pressures

I understand that there is a lot of damage to Qatari natural gas production, but that’s a European problem; it’s not an American problem. Between the United States and Canada, there were estimates that I read maybe 10 years ago that there was enough natural gas to power the entire planet for something like 600 years. So, as you are trading an American contract, you have to understand just how abundant natural gas is in the United States.

Now, later this year, there will be export pressures, but that will be a seasonal thing and probably not enough to see the spike that we saw earlier this year, which was based on a series of winter storms causing massive demand for natural gas. This time of year, we typically see a lot of negative pressure, so anytime you get a knee-jerk reaction to the upside, you have to be looking for wicks to the upside that show signs of rolling over and then you start to short again. It’s a short-term trader’s market; it’s definitely bearish.

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