Natural gas markets have jumped a bit in the early hours on Monday which should be no real surprise.
Natural Gas
Natural gas markets have jumped a bit in the early hours on Monday, which makes a certain amount of sense considering that the market has a lot to pay attention to. After all, we are in the time of year where people start to think about warmer temperatures and the fact that demand will drop significantly.
With that being the case, I think we have got a situation where traders are looking to short any rallies that show signs of exhaustion. With that being the case, you also have to recognize that the markets do tend to get a little bit volatile in case we have some type of massive winter storm.
Ironically, it did snow in the United States during the session, but it is also supposed to be above freezing this afternoon and fairly warm the rest of the week. In other words, I think any time natural gas really starts to spike, you have to be looking for a short position.
Regional Supply and Geopolitical Pressure
The Americans and Israelis attacking the Iranians is the headline at the moment. What is even more interesting is that Qatar has decided that they are going to cease production. This is a European problem, not a North American problem. It could cause a little bit of upward pressure based on exports coming out of the United States, which is what this contract is.
Most CFD traders do not have access to the Rotterdam natural gas futures markets and therefore it is not as relevant. There will be a knock-on effect, there will be Europeans buying natural gas from America, but also, we are rolling over into a time of year where it is not as bad to have less gas available.
Again, I think nothing has truly changed in my analysis over the last couple of weeks and the $3.50 level above is probably a ceiling for the moment. I like fading short-term rallies, but this is a short-term trader's market. Hanging onto a short probably.