Natural Gas: No Heating This Summer!
Philip Hopf | Feb 25, 2021 09:51AM ET
The natural gas market rallied throughout the week, but the increase was met with resistance, as the low temperatures across the US and Europe made the first signs of spring that came up. Nonetheless, there was an increased demand this winter, as it was unusually cold this year. Combined with the decreasing gas supply, the prices, therefore, increased rapidly.
For example, the production at the Waha-hub, which is a pumping hub in the Permian Basin, located within the Mid-Continental oil field, became so expensive that the price rose to $206 per million British thermal units on Feb. 16. This was the highest since 1995.
In the end, the prices dropped, and this week the market started with a minus. The most critical support line remains at $2.734. Below that level, we expect the prices to decline to $2.30 and even $2.00. From a technical perspective, as long as we don't breach that support line at $2.734, we need to expect higher prices. From a fundamental standpoint, we should bear in mind that spring is approaching, which means that the demand for heating, hence, natural gas should decline.
Natural Gas 1 Day Chart
To summarize, the price for natural gas is ready to tackle $3.40 if we argue from a purely technical perspective. However, the market has not fully convinced us, and fundamentally, the market will not be able to get rid of the oversupply in contrast to the longer-term sinking demand. Accordingly, the alternative scenario that aims at $2.00, with its 38% probability, remains a considerable possibility.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.