Natural Gas: February Freeze Likely to Propel Uptrend

Movements in the natural gas futures contracts in the last week indicate a reversal is still on the card as the buying was visible below $ 2.774, despite continuous selling by Hedge funds in three trading sessions of the last week.

On Friday, the natural gas futures finally found a bottom at $2.688 as the day’s closing was above the previous day’s close despite a sudden surge in selling pressure.

Undoubtedly, Thursday’s move by the natural gas futures was full of skepticism as the selling spree was there even after the weekly inventory announcement for a withdrawal of more than expected levels.

No doubt the natural gas futures had to pass through extreme volatility during the last week due to warm weather despite the official start of the winter on Dec. 21.

This weekend could see a significant change in weather conditions as a frigid weather system will track across the Midwest the next few days with lows of the -20s to 20s that could result in the addition of frosty weather systems to follow next week.

I believe the natural gas futures have finally found significant support at $2.688 which could be the last lowest point of the year 2023.

No doubt traders are still suspicious since the rallies witnessed sell-offs during the last three weeks complying with the messy weather reports that resulted in rapid surge production of dry natural gas.

I believe that now, the news flow could take a U-turn as the frosty weather conditions could start in early February.

Undoubtedly if the Texas-based LNG Freeport terminal reopens in early February, shipment of natural gas to other parts of the world could re-balance the demand and supply equation during the next few weeks.



Technically speaking, in a weekly chart, the natural gas futures could start the upcoming week with a gap-up opening and could try to sustain above the immediate resistance at $3.152 before finding a breakout above the second resistance at $.3.261 and third significant resistance at 200 DMA, which is at $3.755.



In a daily chart, the natural gas futures closed the last week at the level tested last time on Apr. 27, 2021, from where the advent of a recent uptrend started that hit a high at $10.005 on Aug. 23, 2022.

No doubt, actual shipment from the Freeport Export facility could take some time after its reopening, but this could propel an uptrend in the natural gas prices as the weekly withdrawal from the stockpiles will surge to 100 – 200 Bcf per week.

Disclaimer: The author of this analysis does not have any position in Natural Gas futures. Readers are advised to take any position at their own risk; as Natural Gas is one of the most liquid commodities in the world.