Natural Gas Price Forecast – Natural Gas Continues to Grind

Natural Gas Technical Analysis

Natural gas has done very little during the trading session on Thursday and quite frankly, that’s not a huge surprise. We are just bumping along the bottom and quite frankly, there’s nothing to do here unless you’re willing to hang on to this commodity for some time. I have no idea why retail traders are so interested in natural gas because quite frankly, oversupply is going to be an issue for the foreseeable future, probably decades. However, there are cycles to the natural gas markets that are worth paying attention to. We are entering a very dead time of year for natural gas so I don’t expect that it will do much for the next several months.

The natural gas contracts that you are trading, the CFDs or Futures, doesn’t matter, are based on US consumption of natural gas, and therefore you have to be cognizant of the weather in New England is of course the main area. In the wintertime and in the summer, you have to look for whether or not there is a heat wave. Otherwise, natural gas is so abundant in the United States, that we literally burn it off when we drill for oil because there’s just so much. Personally, I live in an area that has so much natural gas that they have stopped looking for more. They just have too much in Eastern Ohio. And Eastern Ohio isn’t even the biggest area. So, with all that being said, this is a commodity that is extremely abundant and at this point in time, it’s difficult to even find storage for it. In that environment, I just don’t see how natural gas rises very quickly.

There are a few things that could cause it, perhaps some type of disruption out of the Middle East, therefore making people buy more out of the United States, but really at this point in time, the demand is not going to be that high due to the fact that the Northern Hemisphere, and of course, industrial demand has just fallen off the rails. The way I’ve played this is I’ve bought an ETF and I just wait until we get some type of spike either due to a heat wave or the fall or winter season later this year, and I’ll collect my profit.

The $1.50 level underneath continues to be a major support level and an area that I don’t think it’s broken because once you get below there, companies just stop drilling. There’s no point in going to work every day just to lose money. That’s the situation that we’re in right now and at this point in time it just doesn’t seem like a market that you can trade short term, maybe long term with no leverage like I do or very little in the CFD. But even then, you have to be very cautious about any swap that you pay.

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