Natural Gas Price Analysis – Natural Gas Jumps on Cold Snap

Natural Gas Technical Analysis

The natural gas market jumped on Tuesday as traders are trying to price in the latest cold snap in the United States. I do think we probably have more momentum here. Short-term pullbacks end up being buying opportunities because, quite frankly, it is freezing outside at the moment, and demand certainly is picking up.

In fact, by the time the New York traders are getting involved, natural gas is up almost 25%. Granted, it is from a very low level, and it is not out of sorts for this time of year. You can see with the exception of when Russia and Ukraine started fighting, most of the time the winter produces a couple of these nasty rips higher.

I think we are in the middle of that. It wouldn’t surprise me at all to see natural gas get back to $5.00, but the $4.00 level between now and then will end up being a bit of a barrier. I also think it takes a while to get there; I don’t think it gets there overnight. The $3.50 level is the beginning of the gap, so we will see whether or not that holds as support, but I would anticipate it does because I know that there are several days that are single digits in the United States coming up over the next couple of weeks.

Seasonal Trading

This will lead to more seasonal trading, meaning that we go to the upside before collapsing in a couple of months. Production of natural gas still remains pretty high, so that is one thing that could cause some issues, but right now, this looks like the demand is really starting to take over.

If you’d like to know more about what drives natural gas prices, please visit our educational area.