- Natural gas markets started pricing in the month of June with a new contract.
- However, the demand for natural gas has come under scrutiny as the global economy is expected to slow down.
- Although there might be a temporary surge in demand due to heat waves in the northern hemisphere, the concerns over the overall demand are likely to outweigh that.
Looking at the longer term, there is a bullish case to be made for the natural gas market as the European Union will have to replenish its stocks after having gone through them over the winter. The United States will also have to provide natural gas to the European Union, which directly influences the price. However, we may have to wait a month or two before any attempt to start buying natural gas by the Europeans.
For now, the natural gas market seems to be settling into a summer range with the $2.00 level acting as the bottom of the range and the $3.00 level as the top. Additionally, the 50-Day EMA is just above the $3.00 level, indicating that there is a certain amount of influence coming from that indicator as well. The market also seems to love round figures, perhaps due to the options markets.
The Market is Facing Challenges
Trading in the natural gas market during summertime tends to be choppy and sideways. Therefore, it is recommended to look at this market through the prism of a range and possibly use an oscillator to make trading decisions when markets get overbought or oversold.
Breaking above the $3.00 level might be the beginning of the Europeans refilling their tanks, but there is no sign of that now. Quite frankly, we would have to see a lot of momentum entering the market, something that I don’t envision. As such, we are likely to see a lot of lackluster chops over the next several weeks.
Ultimately, the natural gas market is facing challenges as the global economy slows down, but there is a bullish case to be made in the longer term due to the need for replenishing stocks by the European Union. As the market settles into a summer range, traders should look at using oscillators to make trading decisions and be prepared for choppy and sideways trading over the next several weeks.
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