Natural Gas Forecast: Markets Drift Lower

Beyond that, you also have the problems in West Africa that are almost certainly going to block natural gas from the European Union this winter.

• Natural gas markets drifted a bit during the trading session on Tuesday, as we are trying to reach the support level.
• The natural gas markets will continue to pay close attention to the cyclicality of the market and of course, the idea that eventually we will have to look forward to the fall, as there will be more demand for natural gas coming out of the northern hemisphere.

All things being equal, this is a market that I think will continue to see a lot of buying on the dip, because quite frankly, it is a cyclical number that we have seen more than once. If we break above the $3.00 level, which is a large, round, psychologically significant figure. If we can break above there, then the market goes looking to the 50-day EMA. After that, we would test the 200-day EMA, but at the end of the day, it’s likely that the market will eventually go looking toward the $5.00 level.

Underneath, I think that the $2.00 level is a major support level, and it would be a bit surprising that the market could even think about breaking through there. If it does, I will probably just end up buying more. The market is one that is simply killing time now, due to the fact that we will eventually see the European Union have to come into the picture and try to replace Russian gas that of course won’t be there this winter. Beyond that, you also have the problems in West Africa that are almost certainly going to block natural gas from the European Union this winter.

We are not necessarily seeing American prices rise yet, which of course is what most natural gas trading is based on. However, the Europeans will eventually have to go looking with hat in hand to the Americans as it’s difficult to see where they are going to get natural gas in any other place. At the very least, you would have to assume that we will get the cyclical trade going, but you need to keep your position size reasonable, staying away from an extreme amount of leverage if you can. At this point, I am a buyer of dips and have no interest in shorting.

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