natural gas prices have just surged by 90% in less than two months it has a history of making incredible moves being one of the most volatile Commodities that exists sometimes moving up by over 600% within a single year but also being able to lose as much as 80% of its value within that same time period natural gas like other Commodities is prone to large supply and demand imbalances and these can create huge opportunities for Traders that are able to take advantage of them us natural gas Futures recently bottomed at $160 in February and have already moved up by about 100% SS this move is similar to many of the recent aggressive recoveries we've seen on natural gas over the last decade which often saw additional upside in natural gas prices over the months that followed the big question is whether this move still has more fuel to run like it did in 2021 where natural gas prices continued to run by another 276 over the 12 months that followed or whether this is going to be more like what happened in 2009 where this powerful natural gas rally proved only temporary and was followed by a devastating 68% move lower completely decimating anyone who took on exposure to natural gas after the original bounce to figure that out we need to look at the supply and demand of natural gas and we need to look at the price action to understand how Traders can position themselves successfully while managing risk Traders want to buy natural gas or any commodity when demand is outweighing Supply because this leads to higher prices this is a chart that shows the total production of us natural gas and this line represents the consumption of us natural gas now we can immediately identify three key moments on this chart where production slowed down while consumption continued to rise or remain stable between 2002 and 2006 between 2016 and 2017 and between 2020 and 2021 these happen to be three periods where Natural Gas Prices rose for extended periods of time these three periods represent some of the most spectacular moves we've seen over the last two decades on natural gas ranging from a 200 to a 67 70% gain as a result of lower production levels today us natural gas production has stayed quite elevated over the last year we can even say that production has outpaced consumption over the last couple of years now this situation can of course change but if they don't the current supply and demand balance of natural gas isn't suggesting that natural gas prices are about to Skyrocket in fact when we look at the storage levels of natural gas in the US they're at quite elevated levels when compared to the average level you would expect at this time of year as you can see from these lines here for example in May of 2022 the storage levels were quite low which again doesn't suggest that there's any type of shortage of natural gas today but that's just the story for the United States Europe is the biggest importer of us natural gas so it's worth taking a look at their situation as well this is what the Storage level of natural gas in Europe looks like today and when we compare that to the average storage levels that are typically seen at this time of year we're in the upper end of that range in 2021 for example natural gas storage levels in Europe were much lower clearly indicating an under supply of natural gas that set the stage for the additional 400% move up in national gas prices that occurred in 2021 and 2022 now again all of this could change very quickly but the aggressive downtrend in natural gas prices that we've seen since 2022 can be explained by these high production and storage levels if production begins to slow down it could begin to get reflected in higher natural gas prices that's why Traders need to pay attention to to and respect the price action natural gas managed to break above its 150 and 200 day moving averages these are two key moving averages that acted as areas for the price to bounce several times during the uptrend in 2021 for the setup on natural gas to look more constructive we need to see these two moving averages begin to slope upwards just like they began to do in late 2020 these upward sloping moving averages are essential characteristics of an uptrend otherwise there's a pretty big risk of getting whipsaw like the break out that occurred in late 2023 traders that are looking for further confirmation the natural gas is indeed beginning an uptrend can also pay attention to this price Channel a breakout Above This Channel could indicate that the market is beginning to price in a future shortage of natural gas on the other hand traders that want to bet on natural gas mov be lower so shorting it could take advantage of the fact that the price is currently at this price Channel resistance initiating a short at resistance with a stop loss above the price Channel could be a trade with lots of potential reward and and limited risk that would take advantage of the high levels of natural gas production and storage in the US and Europe finally it's important to consider the seasonality of natural gas depending on certain seasons of the Year natural gas will tend to perform Better or Worse typically the best months for natural gas are August September and October as the market often begins to price in Rising natural gas demand before the winter begins December January and February are just the opposite where price begins to anticipate lower demand during the Spring and summer June and July are right in the middle but are typically seasonally weaker months for natural gas there's no better place for you to trade natural gas than capital.com the speed at which you can execute the trade is absolutely unmatched this is a platform that was built by Traders for Traders so don't miss a second to become a pro