- Natural gas markets experienced another rally on Friday, with traders closely monitoring the upcoming winter storm in the northeastern United States.
- The storm's potential impact looms large, but natural gas finds itself at a point in the season where sustaining gains for the long term becomes challenging.
- This is especially true unless a supply-related event occurs. Currently, the supply remains ample, implying that this surge is likely a short-lived opportunity, possibly awaiting the release of inventory data.
The $3.33 level has repeatedly proven to be a significant resistance point and is expected to remain somewhat obstructive. Even if this barrier is breached, considering that we are already in February futures and close to transitioning to March, it's difficult to envision a sustainable future for the market. As of now, signs of market exhaustion are notably absent, however I think it is likely to be a situation where the market will react rapidly to any signs of cold leaving the region. This winter has been a bust, so I don’t think that anything is sustainable at this point.
Natural Gas is Fickle at Best
However, one certainty in this fickle market is that if the weekend storm fails to live up to its dire predictions, natural gas prices could plummet. This market requires careful consideration of position size due to its unpredictability. It's crucial to note that the CFD trading in the natural gas market is based on the Henry Hub contract in the United States. Unless a significant event like last year's interruption in the gas supply to Europe significantly impacts the market, the focus remains on US weather conditions. Currently, it seems that Europe's energy demands have shifted towards alternative sources like coal. Consequently, while the market may experience a temporary spike, it would be wise to monitor for signs of exhaustion as potential selling opportunities.
At the end, natural gas markets rallied on Friday, driven by concerns about an impending winter storm in the northeastern United States. However, the seasonal dynamics and abundant supply suggest that this surge may be short-lived. Resistance at the $3.33 level remains a key factor, and sustaining gains beyond it appears challenging. Traders should remain cautious, as the market's volatility means that it can reverse quickly, especially if the expected storm fails to materialize as anticipated.
Ready to trade Natural Gas Forex? Here’s a list of some of the best commodities brokers to check out.