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James Hyerczyk
Natural Gas

Natural gas prices are trading lower on Wednesday after reversing earlier gains following a test of a short-term technical retracement zone. Despite the early rally, the trend is down and traders still aren’t sure if a support base is building, or if the recent strength is only a set-up for renewed selling pressure.

At 13:22 GMT, October natural gas futures are trading $2.157, down $0.002 or -0.06%.

Natural Gas Intelligence said earlier today that “Hotter overnight trends in the latest European data helped boost natural gas futures several cents higher early Wednesday.”

Bespoke Weather Services also indicated the latest European guidance heading into Wednesday’s trading trended hotter compared to 24 hours earlier, diverging from the American guidance, which trended cooler.

“We view the changes as mostly noise, with the overall theme remaining the same, which is a hot-biased pattern for the foreseeable future,” Bespoke said. “We could see a dip down close to normal in the back of the 11-15 day, but we still believe the pattern will generally run hotter than normal on into September as well. What does change is the regional breakdown, as the focus now starts to shift from anomalous heat in the South to stronger heat into the Midwest and East, even back into the West.”

Short-Term Weather Outlook

According to NatGasWeather for August 14 to August 20, “Strong high pressure will dominate the southern US with highs of 90s to 100s, hottest over the Southwest & Texas for strong demand. Weather systems with cooling will sweep across the Midwest and Northeast through the weekend with highs of 70s and 80s for only light to moderate demand. However, hotter temperatures will spread across the northern US next week with highs of upper 80s to lower 90s gaining in coverage. Overall, demand will be moderate-low across the northern US and high across the southern US.”

Daily October Natural Gas

Daily Forecast

The weather forecasts could be supportive for prices over the near-term and with prices so low and traders heavily short, it’s not going to take much to trigger a strong short-covering rally.

The main trend is down. The trend will actually change to up on a move through $2.338, while a move through $2.045 will signal a resumption of the downtrend.

The short-term range is $2.338 to $2.045. Its 50% to 61.8% retracement zone at $2.191 to $2.226 stopped the rally earlier in the session. Overcoming this area later today will be a sign of strength.

The minor range is $2.045 to $2.213. The key for the bulls today is whether buyers come in on a pullback into $2.129 to $2.109. A test of this area could bring in aggressive counter-trend buyers.

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