Natural Gas Price Outlook – Natural Gas Continues to See Sellers

Natural Gas Technical Analysis

Natural gas markets did initially try to rally a bit in early pre-market trading, but has given back all of the gains above the $3 level pretty easily, which for me wasn’t a huge surprise because, of course, you will have a certain amount of options barriers at the $3 level. But it’s also an area that previously had been support, so it should at least in theory be resistance now. Keep in mind that natural gas is a very seasonal fuel, and right now, there is not much in the way of heating demand.

Natural gas is also used to produce electricity, but the United States isn’t exactly hot at the moment either, so air conditioning isn’t an issue. The one thing that could suppress natural gas a bit is concerns about economic growth. Less economic growth means less electricity demand. That being said, we are getting fairly close in the next couple of months to cold weather in the US, and that will drive natural gas prices higher eventually. We are not there yet. We are trading the September contract.

So, I still believe that the rallies that show signs of exhaustion, like the one we’re looking at right now, are typical shorting opportunities. If we fall from here, the $2.75 level, I believe, ends up being a target, followed by the $2.50 level. I don’t think we get much further than that to the downside because sooner or later people will start to look towards the colder months, but as things stand right now, I have no interest in buying this contract.

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