Natural Gas Prices: Trends and Trader Opportunities

Overview

• Recent surge in natural gas prices by 90% in less than two months.
• Highly volatile commodity with historic moves up to 600% in a year and drops up to 80%.
• Future market fluctuations depend on supply-demand imbalances.

Recent Market Trends

• US natural gas Futures bottomed at $160 in February and nearly doubled since.
• Similar aggressive recoveries in the past decade often followed by further price increases.
• Key question: Will prices continue to rise like in 2021 or drop sharply like in 2009?

Supply and Demand Analysis

• Natural gas prices rise when demand outweighs supply.
• Historical analysis: Production slowdowns vs. consumption increases led to significant price hikes in:
  • 2002-2006
  • 2016-2017
  • 2020-2021

Current Production and Consumption

• US production has been high over the last year, sometimes outpacing consumption.
• Elevated storage levels in the US and Europe suggest no current shortages.
  • May 2022: Low storage levels.
  • 2021-2022: Europe’s low storage led to 400% price jump.
• Price downtrend since 2022 due to high production/storage levels.

Price Action and Moving Averages

• Natural gas broke above 150 and 200-day moving averages.
• Key for uptrend: Moving averages should start to slope upwards.
• Risk of getting 'whipsawed' without upward sloping averages.
• Additional confirmation required through price channel breakout.

Trading Strategies

• Bullish Strategy: Look for continued upward trend, waiting for moving averages to slope upwards.
• Bearish Strategy: Short natural gas at current resistance levels with stop loss above price channel.
• Seasonal Strategy: Best months for natural gas are August, September, and October; weakest are December, January, and February.

Conclusion

• For successful trading, monitor supply-demand dynamics, storage levels, and price action.
• Capital.com offers fast execution and is a trading platform designed for traders.