Natural Gas Price Analysis – Natural Gas Forming a Base in Backwardation

Natural Gas Technical Analysis

The natural gas markets are stabilizing near the $3.80 level in the futures contract that we are now trading, that would be March. But this does create a little bit of a conundrum for retail traders as retail traders find themselves sometimes trading in the spot market, which is much higher.

What this tells us in extreme backwardation is that natural gas prices are expected to fall and fall pretty significantly over the next couple of weeks. That’s exactly how I would play this, I would keep an eye on the futures market for guidance and maybe take advantage of the mismatch with spot price.

Market Stabilization and Seasonal Demand

Of course, the spot price of natural gas is pretty high right now. We have winter storm Fern going on, which technically, I guess, has ended, but we also have really cold weather in the northeastern part of the United States that needs to be watched. That brings up the demand for natural gas, and we find ourselves in this extreme backwardation.

But it can be played as a potential shorting opportunity. In the futures market, which the CFDs that I trade are based on, you’re looking at stabilization and probably a slow creep higher for a little bit.

I don’t know if we get to the highs that we just made. That was probably the high for the winter, but maybe a move of about $1 I think is reasonable expectation before it’s all said and done here. This time of year, I don’t short natural gas, although I’d be tempted to do it in the spot market at the first signs of exhaustion.

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