FXEMPIRE
All

Natural Gas Price Fundamental Daily Forecast – Contract Expiration, Big Short Position: Ingredients for Whip-Saw Trade

With today’s looming futures contract expiration, be prepared for heightened volatility and whip-saw action. The size of the speculative short position also makes the futures contract vulnerable to a short-covering rally later in the session.
James Hyerczyk
Natural Gas

Natural gas futures are trading lower on Tuesday, continuing yesterday’s steep sell-off that was fueled by a new forecast calling for milder-trending temperatures. Adding further to the weakness were concerns about oversupply. Activity in the spot market was mixed with prices trading higher on the West Coast due to an approaching storm, and lower throughout the rest of the country.

At 12:03 GMT, January natural gas futures are trading $2.526, down $0.058 or -2.21%.

Weather Woes Sink Prices

Prices were drilled lower on Monday after midday Global Forecast System (GFS) showed warmer temperatures were coming, including less cold for the period from Thursday through December 6, according to NatGasWeather. Additionally, the GFS was “faster to warm up conditions” across the Lower 48 after December 6.

“The natural gas markets are clearly disappointed in such a quick milder trend showing up, but losses could also be exacerbated” by Monday’s options expiration and the looming expiration of the front month contract on Tuesday, NatGasWeather said. “The latest GFS does tease cold continuing across the northeastern U.S. December 7-10,” but coming off a “big loss in demand” from recent data, “it’s possible the natural gas markets won’t bite on anything that far out.”

Money Managers Increased Short Position

Commodity Futures Trading Commission data as of last Tuesday (November 19) showed the managed money short position increasing by 41,816 contracts week/week, while the managed long position decreased by 8,831 contracts, according to analysts at Enverus.

Daily Forecast

Early Tuesday, January natural gas futures took out the last two main bottoms at $2.521 and $2.520, but quickly regained these levels. This indicates that the initial breakdown was fueled by sell-stops. If the selling pressure continues through today’s intraday low at $2.511 then we could see an extension into the September bottom at $2.484.

With today’s looming futures contract expiration, be prepared for heightened volatility and whip-saw action. The size of the speculative short position also makes the futures contract vulnerable to a short-covering rally later in the session.

Don't miss a thing!
Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Latest Articles

See All

Expand Your Knowledge

See All
IMPORTANT DISCLAIMERS
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
RISK DISCLAIMER
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.
FOLLOW US