Natural Gas Price Prediction – The Short-Squeeze Continues; Managed Money Continue to Exit Short Positions

Natural gas prices continued to break out on Monday, surging another 3.4%, as a chain of storms are making there way across the Atlantic. The rise in prices is a function of short positions getting squeezed. The volume of managed money that is short futures and options far outnumbers the volume that is long, which is likely to lead to additional buying. LNG exports rose in the latest week, helping to put some upward pressure on demand.

Technical Analysis

Natural gas prices surged on Monday as short-covering continued. Prices are now poised to test target resistance near the May lows at 2.60 and then the May highs at 2.77. Support for natural gas is seen near the 10-day moving average at 2.35. Momentum is positive as the MACD (moving average convergence divergence) histogram is printing in the black with an upward sloping trajectory which points to higher prices. The fast stochastic is printing a reading of 98, well above the overbought trigger level of 80 which could foreshadow a correction.

The short squeeze is on and managed money that is short is covering. According to the latest commitment of traders report released for the date ending 9/3/19, managed money reduced short position in natural gas by 24K contracts while increasing long position by 10K. Currently managed money that is short is 3-times the number that is long, 311K to 135K. Separately, US LNG exports increase week over week. Twelve LNG vessels with a combined LNG-carrying capacity of 43 Bcf departed the United States between August 29 and September 4, according to shipping data compiled by Bloomberg. One vessel was loading at Sabine Pass terminal on Wednesday.