Natural Gas Price Outlook – Natural Gas Continues to Hover at Lows

Natural Gas Market Analysis

The natural gas market continues to be very noisy as we are trying to find the actual bottom in the market. We are currently hovering around the $2.85 level in the futures market, which is trading April pricing. April is typically a time of year when you see a drop in demand, and therefore it makes a certain amount of sense that we are at these extraordinarily low levels.

The question at this point is, how do you trade this, because when we rolled over the market just absolutely collapsed. With this being the case, I think you have to be very patient here. I think the best thing that you can do is wait for some type of rally, based on probably weather, and then look to short it on the first signs of exhaustion.

Market Influences and Trading Strategy

You could buy at extremely low levels if you wanted to, but the question is, when is the demand going to pick up? The reality is, it could be summertime; you might be sitting in a position for a couple of months. So, I suspect that Occam’s Razor tells you are probably better off waiting for some type of rally to start shorting again.

Natural gas is dead money, and unfortunately, most traders out there don’t realize what they’re trading. They’re not trading natural gas in Europe or the Middle East, they’re trading American natural gas, and this is influenced by American demand more than anything else. Sure, there are exports to Asia and Europe, but the bulk of it comes down to weather. Right now, weather’s not an issue.

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