Natural gas markets have gone back and forth during the course of the trading session on Wednesday as we await fresh inventory numbers and of course are taking a close look at the overall demand for Nat gas. The cyclical trade typically favors falling prices this time a year, but we have had a colder than usual spring in the United States and therefore the demand has been a little higher than usual.
NATGAS Video 13.05.21
With this, the market has approached the $3.00 level, but has not been able to break above it. The $3.00 level extends all the way to the $3.20 level as far as downward pressure is concerned. I do think that it is a bit much to ask the market break above there, despite the fact that commodities in general have been rallying quite nicely. Because of this, it is only a matter of time before the warmer temperatures in places like the United States and Europe drive prices even higher. In general, this is a market that I think will maintain the overall consolidation between the $3.00 level and the $2.40 level. Remember, we still have a gap underneath it has not been filled near the $2.70 level which I think is the next move as soon as we can get a little bit of momentum to the downside.
If we do rally from here, I will simply “reset” and look for an opportunity to short what is an obvious cyclical trade. All things being equal, it is very unlikely to take off to the upside for any significant amount of time, because demand is certainly going to fall off of a cliff, although the idea of the “reopening trade” has had an influence recently.
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This article was originally posted on FX Empire