Natural Gas Price Analysis – Natural Gas Stalls Below $3.00 as Summer Supply Persists

Natural Gas Technical Analysis

The natural gas market initially tried to rally a bit during the early part of the trading session on Tuesday, but we continue to see overhead pressure. Quite frankly, this time of year, natural gas is essentially dead money unless there’s some type of massive heat wave. And while we have had a little bit of that in the United States, the reality is it’s not enough to really do damage to the supply.

We are trading the August contract, so it is possible that we price that in, and generally speaking, that is a short-term move if history’s to be believed. A few months down the road, we’ll start to talk about winter, and that’s an entirely different game. It becomes much more bullish for natural gas, as natural gas is one of the favored ways to heat homes in the northeastern part of the United States.

Summer Headwinds and Seasonal Range Technicals

There are questions about whether or not the Europeans will have to import liquefied natural gas, but so far, the natural gas supply out of Qatar is still thought to be adequate and is back up to about 80% production, the last I heard. That helps Europe, and that means there will be less export demand coming out of this contract, which is based in the United States. That’s not to say that we won’t have a strong winter; it’s just that we don’t have to price that in, at least not quite yet.

Ultimately, this is a market that, this time of year, rallies tend to be very short-lived, and traders tend to short them when they can at the first signs of exhaustion. The $2.75 level appears to be support. The $3 level right now appears to be resistance. This is a market that is very short-term focused.

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