On Wednesday, natural gas markets experienced a further drop due to the current bearish sentiment. The increased natural gas prices earlier were due to fears about Europe's heating situation after the start of the Russian/Ukrainian war and the destruction of the Nordstream II pipeline that supplied gas to Germany. However, the situation has changed with the restoration of the Freeport LNG terminal in Texas, which allows for massive natural gas exports from the United States.
Additionally, as the northern hemisphere moves into warmer weather, the demand for natural gas for heating decreases, which typically results in cyclically weak periods for natural gas. This has been compounded by the slowing of the global economy, which could further reduce the demand for natural gas as it is a significant source of electrical power.
Looking at the charts, there seems to be a trading range with support at the $2.00 level and resistance at the $3.00 level. The 50-Day EMA is also a significant factor in the downward pressure on natural gas prices. Although natural gas prices are unlikely to collapse entirely, it is currently easier to sell than buy contracts.
However, there will come a time soon when traders will start buying natural gas due to value hunting. This could happen when temperatures start to drop, and there is an occasional heatwave that could send the market higher during the summer months. These spikes will likely be selling opportunities, and even if the $2.00 level is breached, there will be support at the $1.80 level.
Ultimately, the current situation for natural gas is bearish, but it is not entirely dire. There are still opportunities for traders to buy contracts and capitalize on the market's cyclicality. The market could experience a reversal soon, and value hunting could drive natural gas prices higher. However, until then, it is advisable to sell contracts during the occasional spikes and wait for the market to turn before buying.
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