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Natural gas trades higher – rally incoming?

Natural gas traders put a brief hold on selling to look around and analyse the next steps. The selling continues on Wednesday.

The decline in natural gas prices halted on Tuesday this week, as traders looked to be at a turning point following a two-month decline. Analysts are stating that the traders need greater certainty over demand in order to push prices significantly higher. Henry Hub increased by $0.162, which is 6.7%, to $2.5670 per million British thermal units (MMBtu) on Tuesday.

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The Energy Information Administration (EIA) reported that as of the end of the week of February 3rd, the total amount of natural gas in storage in the United States was 2,366 tcf (trillion cubic feet). This is a 10.9% increase over the previous year’s level of 2,133 tcf. The next date of storage reports is expected February 16th.

GAS storages

Natural gas storage 5Y comparison chart, source: Energy Information Administration

Bulls are not likely taking over 

Tuesday’s increase in natural gas prices was accompanied by a decline in trading volume, indicating that further recovery is unlikely in the immediate future. On Wednesday, we see an immediate turnaround towards the red after the US session open. Currently still above $2.540, however already with a 1% decline.

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In the near future, a continuation of the current trend is likely, with a possible decline to the $2.00 per MMBtu zone. Even though a platform seems to be building for the bulls, it is not very likely we will see prices go much higher. The trading range could remain within the $2.350 and $2.7 seen previously.

nat gas

Natural gas 1D chart, source: tradingview.com, author’s analysis

Tomáš is a financial reporter with US markets as his main field. Tomáš is an aspiring author and entrepreneur aspiring to help people get better in financial knowledge.

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