Advertisement
Advertisement

Natural Gas Price Prediction – Prices Edge Higher as Hedge Funds Cover Shorts

By:
David Becker
Published: Mar 25, 2020, 19:35 UTC

The weather is expected to remain warmer than normal

Natural Gas Price Prediction – Prices Edge Higher as Hedge Funds Cover Shorts

Natural gas prices edged higher on Wednesday ahead of Thursday’s inventory report from the Department of Energy. Expectations are for a 2-Bcf draw according to survey provider Estimize. This follows a 9 Bcf draw reported by the Energy Information Administration last week. The weather is expected to be warmer than normal over the next 2-weeks, according to the most recent forecast by the National Oceanic Atmospheric Administration. Hedge funds significantly reduced short positions in futures and options in the latest week.

Technical Analysis

Natural gas prices moved higher on Wednesday but were unable to push through resistance near the 10-day moving average at 1.70. Support is seen near the March lows at 1.55. Short term momentum is positive to neutral as the fast stochastic recently generated a crossover buy signal. The trajectory of the fast stochastic is flat which reflects consolidation. The MACD (moving average convergence divergence) histogram is printing in the red with a rising trajectory which points to consolidation.

Hedge Funds Square Up

Hedge funds bought back a significant amount of there short position in futures and options according to the latest Commitment of Trader’s report released for the date ending March 17, 2020. According to the CFTC, managed money reduced short positions in futures and options by 122K contracts. This was the largest reduction of contracts seen in natural gas in the past 5-year in one week. Hedge funds remain short but the open interest is 2-contracts short for every one contract that managed money is long.

About the Author

David Becker focuses his attention on various consulting and portfolio management activities at Fortuity LLC, where he currently provides oversight for a multimillion-dollar portfolio consisting of commodities, debt, equities, real estate, and more.

Did you find this article useful?

Advertisement