Why natural gas prices could fall in the near-term

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March 6, 2019 1:04pm NYSE:UNG

natural gas

From James Hyerczyk: Natural gas futures edged higher early in the session on Wednesday, but prices retreated as the buying slowed and sellers increased their presence. The price action suggests the futures market is being well-supported by aggressive speculative buying, but that weakness in the spot market may be exerting some selling pressure.

At 12:33 GMT, April natural gas is trading $2.873, down $0.012 or -0.42%.

Short-term Weather Outlook

According to the NatGasWeather forecast for March 6 through March 12, “Frigid cold continues across much of the central, northern and eastern US with lows again dropping into the -10s to 20s, but with conditions to close the week moderating. This weekend will bring warmer conditions across the East. After a cold start across Texas and the South today, temperatures will rapidly warm the next several days into the 60s to 80s. The West remains cool and unsettled as weather systems bring rain and snow. A new cold shot will race across the northern US early next week followed by rapid warming Great Lakes and Northeast. Overall, national demand will be high-very high this week, then easing this weekend.”

Traders Shifting Focus to Supply Worries

Bespoke Weather Services is saying, “Despite weaker cash prices Tuesday, futures remained well-supported, as the market shifted focus to the low stock situation. The current cold snap continued to drive tighter balances Tuesday, and the lack of warmer than normal pattern in the medium-range supports an end-of-season storage scenario under 1.1 Tcf.”

“…Balances should ease off at least somewhat over the next few days as the nation, especially the South, moderates quickly in the wake of the current strong cold,” Bespoke said. “Given how tight spreads are, we think this would increase risk of a pullback in April prices, although we see it as unlikely that any pullback goes lower than the $2.80 level.”

Daily Forecast

Traders continue to toy with the technical target area at $2.812 to $2.871. Reaction to this zone is likely to determine the near-term direction of the April natural gas market.

With the return of warmer temperatures, we’re looking for weakness to develop on a sustained move under $2.871. If the selling pressure increases then look for the selling to possibly extend into $2.812.

April natural gas will be particularly vulnerable to a break under $2.812. This move could trigger a steep break into $2.731 to $2.691.

The United States Natural Gas Fund L.P. (UNG) was trading at $24.94 per share on Wednesday afternoon, down $0.49 (-1.93%). Year-to-date, UNG has gained 6.95%, versus a 4.49% rise in the benchmark S&P 500 index during the same period.

UNG currently has an ETF Daily News SMART Grade of C (Neutral), and is ranked #52 of 108 ETFs in the Commodity ETFs category.

This article is brought to you courtesy of FX Empire.

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