Natural Gas: A Bearish Outlook
Benedetto DiCostanzo | Mar 30, 2015 01:58PM ET
Last Thursday’s EIA Natural Gas Storage Report showed an injection of 12 billion cubic feet. It was its earliest March storage injection in 3 years. It has been on a near record production pace and it doesn’t look like it will be slowing down. Weather may show some cold spots and some demand for heating, but not at a pace that would cause severe supply disruptions. With warmer weather on the way we are at the end of heating season demand and before air conditioning demand. We are nearing shoulder season where natural gas demand and prices should make seasonal lows.
Looking at the daily continuous chart on natural gas (NG), we see that NG has been consolidating since making lows back on February 6th at 2.567and highs on February 23rd at 3.045. A triangle formed and price has broken below the upward sloping trendline. It has 2 closes below the trendline and seems poised to trade down to 2.235, in my opinion. NG gas is below its moving averages and MACD failed to rise above the zero line and crossed down. This adds to the bearish outlook. I suggest buying put spreads in the month of May or June, to take advantage of this scenario.
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