Natural Gas: Bears Pushed Aside as Futures See Significant Buying Support
Satendra Singh | Mar 30, 2023 21:17
Natural gas futures movements during March 2023 suggest a decline in bullish sentiment as prices found buying support at $2 and are now poised for a sharp reversal.
On March 29, 2023, natural gas futures traded in a tight range between $2.104 and $2.224, hitting a new low at $2.104 before closing the day at $2.183 amid fears of decreasing heating demand until Wednesday.
However, on March 30, natural gas futures appear steady while attempting to hold above Wednesday's low amid changing weather conditions.
According to reports from natgasweather.com, cool conditions are expected to persist across much of the US, with lows of 0s to 20s across the northern US and 30s and 40s for the southern US, including continued rain and snow over California.
Temperatures will be coldest across the Rockies and Northern Plains, with highs of the 20s and 30s, while mild over the rest of the northern US with highs of 40s to 60s. Warm conditions will rule the southern and eastern US late this week and again next week with highs of 60s-80s for moderate to light national demand. Demand could remain moderate-high today, then moderate to low.
From a technical standpoint, in the 15-minute chart, natural gas futures appear ready to bounce after testing the day's low at $2.117, though they could face resistance at $2.186 amid surging selling pressure despite a significant change in trading sentiment, as more than 90% of positions are long.
Natural gas futures may continue the bullish sentiment after holding above the 200 DMA at $2.172, even after the inventory announcement in today's trading session.
Friday could be a little frisky as indecisiveness among traders still lingers. A sustainable move above the significant resistance at $2.767 will provide the first confirmation for a breakout move this week.
On the other hand, the increase in US electricity output is bullish for natural gas demand from utility providers. According to the Edison Electric Institute, total US electricity output in the week ending March 25 rose +5.9% YoY to 74,307 GWh (gigawatt hours). Additionally, cumulative US electricity output in the 52 weeks ending March 25 rose +1.2% YoY to 4,110,090 GWh.
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Disclaimer: The author of this analysis does not have any position in natural gas futures. Readers should take a trading position at their own risk as natural gas is one of the most liquid commodities in the world.
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