Colder Weather = NAT Gas DemandWith the cold weather across the US it is looking like Natural Gas prices are expected to rise!
GNM1! trade ideas
Natural Gas at Critical Support - Breakout or Breakdown? Natural Gas Futures (4 HR Timeframe)
Analysis Overview:
Natural Gas is currently trading within a well-defined ascending channel, showing consistent higher highs and higher lows. However, the price is now testing the lower channel support around 323.8, which could determine the next directional move.
Ascending Channel:
The price has respected the channel boundaries, with the upper trendline acting as resistance and the lower trendline as support.
Currently, the price is hovering near the lower support zone, indicating a possible breakout or
A confirmed breakdown below 323 could lead to further downside momentum, targeting the 305 level, which aligns with a significant supply zone.
This would represent a potential 7.64% decline from current levels.
Supply Zone: Resistance expected around 330-335. Watch for rejection patterns in this zone.
Demand Zone: Support exists near 305-310, providing a potential buying opportunity if the price drops to this level.
Volume & Moving Average:
The price is below the 50-period moving average, indicating bearish momentum. Watch for price interaction with this dynamic resistance.
Key Levels:
Resistance: 330 (upper channel).
Support: 323 (channel support), 305 (key demand zone).
Trading Strategy:
Bearish Setup:
Entry: Below 323 after a confirmed breakdown.
Targets: 318 - 313 - 308
Stop Loss: Above 330
Conclusion:
Natural Gas is at a critical inflection point. Monitor price action closely for a breakout or breakdown. Use proper risk management and wait for confirmation before entering trades.
Let me know your thoughts in the comments! 🚀
#NaturalGas #TechnicalAnalysis #TradingView #MCX #PriceAction
NATGAS Rising Support Ahead! Buy!
Hello,Traders!
NATGAS is trading in a
Rising opening wedge pattern
And the price will soon
Retest the rising support
Below so we are bullish
Biased and we will be
Expecting a move up
From the support line
Buy!
Comment and subscribe to help us grow!
Check out other forecasts below too!
Weekly update 1/19/25 - 1/25-24Weekly Update 1/29 – 1/25:
Two things of importance this week to consider. First and always is the weather and second and always is the supply/demand storage balance. Models have been having some trouble the last four days in holding the Greenland blocking in place. Which is showing up as the arctic cold being displaced and not being injected into the North American mid-continent. The Polar vortex is still predicted to continue elongating though February and early March. Which should keep furnaces burning and gas being consumed. This is a longer term impact on NG pricing, especially with models varying from run to run showing brief run ups in temperature the last few days of January, which happen to coincide with the February contract roll-over. So, I will briefly touch upon the weather set up, but of more importance this week is the Artic cold and frozen precipitation making its way to the Gulf Coast. Which will have a tremendous impact on well head freeze offs and the LNG production facilities. I believe this is going to set up a one-two punch, if you will for the next 7-10 days of trading.
Weather impacts. The weekend GFS weather data trended 3 HDDs warmer, while the EC trended 6 HDDs colder. Both maintain a frosty Arctic Blast the several few days, although the EC was numerous HDDs colder than the GFS with a weather system into the Midwest and East Jan 28-30. Both then forecast a much milder US pattern gaining ground over the US the first few days of February, although with the GFS teasing a new frigid blast pushing into the Midwest around Feb 2-4. Sunday night and Monday opening we can expect an emotional reaction on the models turning warmer since Friday mid-day and the MLK trading holiday tomorrow. There was a great deal of profit taking as of Friday EOD, with the price moving almost $1.00 off the lows of the month. I would hope people would be smart enough to take some profits off the table after such a big move! But, for the week there were two 60 cent moves and one 40 cent move for the week, and I see no change in this pattern until we get into the second week of February and the back half of winter starts to verify for storage amounts. The weather this week is going to be down right brutal in the US. The first concern are the well head freeze-offs. Today, 1/19/25, production is down to 101 BCF/d with freeze offs in the Bakken and the Marcellus. We are expecting the late cycle revisions to revise production down further. There is a belief that production might hit the lows seen last year of 90 BCF/d. “We could see 10 Bcf/d or more of lost production due to freeze-offs” during the cold snap, said Huenefeld. These could include “substantial disruptions” not only in the Marcellus Shale, but potentially the Midcontinent, Haynesville Shale and Permian Basin, he said. Reduced production, in turn, “could exacerbate the storage draw” for the week ending Jan. 24, which may exceed 300 Bcf, Huenefeld said. That’s right industry followers are now confirming that we can see a 300 BCF withdrawal this week! This would bring storage under the 5-year average for the first time since last winter. The cold is here to stay for the next seven days and that will continue to be a big factor on production and heating demand. As the week wears on and the models battle back and forth, we can expect that daily model runs to keep daily pricing volatile. So be prepared for daily swings 20-30 cents again. Long term I am still in the colder than normal belief. This continued elongation of the Polar Vortex is not predicted to end, we just need the models to get on board. But this I believe will happen in time.
Supply/demand storage concerns: Well heads, pipelines and Europe! As discussed above, production is being curtailed, via Mother Nature. Well head freeze offs have been a constant concern in the Bakken area in North Dakota. This has skyrocket pricing all over the US with Henry Hub spot price currently $10.70. Spot pricing in the North East is currently trading over $100.00 BCF. While there is limited contribution to the overall supply structure coming out of the Bakken, it does supply more NG than the GOM and it is a good barometer for infrastructure issues with the production and transportation of NG. As the temperature drops the water in the gas condensate freezes and prevents the gas from flowing, both at the well head and at the compressor stations which move NG in the pipeline. It only need to be a few degrees below freezing to create a giant headache for the production and distribution of NG. Wood Mackenzie also noted that, “A long list of pipelines across the U.S.” have already posted operational flow orders (OFS) and weather alerts, anticipating the shocks of extreme cold temperatures that could linger until Wednesday or Thursday. “The complete list of pipelines that have issued OFOs or OFO warnings is too long to include,” Wood Mackenzie said in a separate update. With all 50 US states predicted to be below freezing and the major production areas to be 5-20 degrees below freezing, we can start to see where and why production would drop for the next 5 days. Take above normal HDD, then add in drop in production, and it is a nice recipe for bullish momentum. LNG terminals have been running at historic levels the last three days. We are waiting for confirmation for the first 16 BCF/d! Which I see happening today or tomorrow. Now the big worry sometime Wednesday morning is if it is too cold to produce LNG at the coast facilities. There is a historic winter storm predicted to lay down frozen precipitation from Houston to Savannah, Ga along the I-10 corridor. Which is the heart of LNG country! If you remember last year, Freeport experienced a severe freeze off which disrupted LNG production and needed repair for over 6 weeks. This was the beginning of the downturn in NG pricing last year to the lows in February-March 24. This season is a bit different in that there is a concern that the US is colder than normal and NG storage is going to be below the 5-year average. But Institutional traders love a reason to sell and take our money. Remember history may not repeat, but it does rhyme! So, the expectation is that LNG production will keep bullish momentum on pricing, but keep a keen eye on facility issues to rug pull the LNG card.
This is not investing advice, please trade at your own risk. But I did take positions the end of the day Friday, with the expectation that there will be big disruptions in the production of supply. Which I will hold hopefully until the EIA report. I do expect trading to be a bit light due to the US futures market having abbreviated hours. Which I believe will be a good set up for the news of freeze offs coming in Monday afternoon and night for open on Tuesday. I expect and will be trading the big daily bounces once the market opens in London tomorrow, but will be prepared for the NY market to be closing early. I will be watching LNG facilities for signs of distress with production numbers declining. If I see production of LNG dropping, I will be expecting it to temporarily impact a downward trend on pricing. Lots and lots to be watching out for.
Keep it burning boys!
NATGAS Technical Analysis! BUY!
My dear friends,
NATGAS looks like it will make a good move, and here are the details:
The market is trading on 3.916 pivot level.
Bias - Bullish
Technical Indicators: Supper Trend generates a clear long signal while Pivot Point HL is currently determining the overall Bullish trend of the market.
Goal - 4.025
About Used Indicators:
Pivot points are a great way to identify areas of support and resistance, but they work best when combined with other kinds of technical analysis
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WISH YOU ALL LUCK
Natural Gas Futures (4H) - ABCD Pattern Analysis and PRZ Levels"In this analysis of Natural Gas Futures (4H timeframe), we identify a bullish ABCD pattern that projects a Potential Reversal Zone (PRZ) around 394.5-395. Key highlights include:
ABCD Pattern: The 1.618 Fibonacci extension from the BC leg aligns with the PRZ.
Current Price Action: Natural Gas is trading around 368.6, indicating a strong upward momentum.
Key Levels:
Resistance at 394.5 (PRZ zone).
Support levels marked at 365.2, 364.3, and 361.5.
Strategy Insight:
Traders may look for potential shorting opportunities at the PRZ (394.5) with confirmations.
Alternatively, breakouts above 394.5 could indicate further bullish movement toward 400+ levels.
This setup is ideal for monitoring reversal or continuation scenarios. Keep an eye on volume and momentum indicators for better confirmation."
NATURAL GAS Long-term buy on the next pull-back.Natural Gas (NG1!) broke this month above its 1W MA200 (orange trend-line) for the first time in two years (last January 2023). Naturally this is a very bullish signal for the long-term and it is more effectively put into context by using our infamous 'Multi-year Cycles', which we introduced on Natural Gas a few years back.
As you can see, every time NG broke above the 1W MA200 after a Support Zone rebound since 1990, it pulled back towards the 1W MA50 (blue trend-line) before resuming the uptrend for a new High.
As a result, we will wait for that right pull-back opportunity to buy and target at least 6.000, which should be achieved by December 2026, which is the Top of the Sine Waves Cycle.
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Is there a chance for natural gas prices to reach 5?Is there a chance for natural gas prices to reach 5 during the summer?
On Wednesday, U.S. natural gas futures remained steady around $3.95 per MMBtu, near the highest level in two years. Forecasts of colder weather in the coming week have increased demand and could lead to a new daily high. Despite lower warming demand this week and a reduction in gas outages, speculators continued to increase their long positions to the highest level since February 2022. I predict that future storage reports will show significant withdrawals from stocks that will exceed the January 2022 record of more than 200 billion cubic feet of gas. These withdrawals could even eliminate the current storage surplus and bring stocks below the five-year average by the end of January.
Before the start of the conflicts in Ukraine, Russia was the main gas supplier for the European Union. However, in response to the attack in the heart of Europe, Russia's market share has been drastically reduced and European nations have become less dependent on Russian gas. Moreover, with the closure of Nord Stream in 2022, most of the gas coming to Europe now travels through the Urengoy-Pomary-Uzhgorod pipeline.
Gas is transported from Russia to Italy via a pipeline that passes through Ukraine and Slovakia, and then splits into branches headed to the Czech Republic and Austria. This section of the pipeline also includes the Urengoy-Pomary-Uzhgorod section that reaches Italy.
As of January 1, 2025, things have changed. Ukraine decided not to renew its contract with Gazprom and closed the taps to prevent Russian gas from flowing through the country. Ukrainian President Zelensky said, “We will not extend Russian gas transit, we will not allow them to make billions on our backs and the lives of our citizens.”
The pipeline closure in Ukraine must be solved with an effective solution. Countries like Slovakia are heavily dependent on Russian gas supplies and must find reliable alternatives. One possible solution would be to transport Russian gas to Azerbaijan and then distribute it to Ukraine and other European countries through this country.
Despite the absence of a final agreement, Azerbaijan should be allowed to transport its gas through Ukraine. However, Zelensky opposes this and said, “We are not playing this game. If there is another country that receives Russian gas and then sends it through pipelines to Europe, it would be as if they continue to benefit from this war and transfer money to Russia.”
The issue of gas supply and payments to Russia is complex. If a European country decides not to make payments until the war is over, then it could be a solution for both sides. However, it still remains an issue to be explored and resolved.
Europe is heavily dependent on gas supplies, and one solution could be increased imports of U.S. gas. This perspective makes me optimistic about rising gas prices in the near future.
My study of the futures curve is showing positive signs at the moment, as the curve is in a contango situation. This means that future prices are higher than the current spot price, which is a good sign for the medium term. As we get closer to contract expiration, the differential between the spot and future prices decreases, and the curve will tend to move back toward the spot price.
Based on my analysis, I predict that in the third quarter of 2025, during the summer, natural gas prices could average 5. This will be influenced by rising temperatures and low inventories. To maximize the outcome, it is important to choose the right investment instrument. One can invest in stocks of gas producers, in an ETF, or directly in gas futures.
If you would like to be notified whenever I post a new article, just click on “FOLLOW” at the top. Also, if you would like to learn more about a particular topic or need some advice, please comment below the article and I will be happy to help you.
NG1! BEARS WILL DOMINATE THE MARKET|SHORT
Hello, Friends!
We are going short on the NG1! with the target of 3.012 level, because the pair is overbought and will soon hit the resistance line above. We deduced the overbought condition from the price being near to the upper BB band. However, we should use low risk here because the 1W TF is green and gives us a counter-signal.
✅LIKE AND COMMENT MY IDEAS✅
The rest of the week of January 13th, 2025 Today's briefing: As expected, the price gapped up at Sunday's opening from panic buying after the weekend model runs turning colder, bullish momentum from Friday, and news of Friday's LNG nominations at all time records. Unfortunately this was not enough to keep the gains versus the bearish news of Monday morning. Troubles at Freeport LNG facility and Sabine pass reminded the market of the continued issues with LNG processing during bouts of cold weather, similar to last years issues. Something to think about if the freeze makes it down to the GOM end of week!!! Freeport continues to be problematic with its processing facilities, and it continues to be used as a good impetus for any profit taking when the time becomes convenient. The nature of Natural Gas trading is such that big swings in price are followed by any bit of news to the bullish or bearish side, so always be on the lookout for any news, what so ever, to move pricing in the opposite direction. Couple this decline in LNG daily exports with forward month backwardation, and a return to normalcy in front month pricing. Which we saw today.
This week expect to see large range bound trading (20-30 cents/day) before the EIA report. The report will be the big news maker before the holiday weekend in the US. Expect a bit of profit taking before the week ends, for position closing for the long US weekend. I am hoping that with model runs continuing to see the end of January cold and with the NGI estimated 259BCF for the period ending January 10th, we will see price rebound to the $4.200 level before profit taking begins. If there are any surprises in the outlook for the cold to come and the report disappoints, then we could see pricing fall to lower support levels below the 20 SMA at $3.621 level. We have closed daily below the 20 SMA only two times since the contract rollover from October into November and this continues to be a good support level until it does not!
But the hope follows that forecasts show enough frigid air over the United States for surpluses to the five-year average currently at more than 207 Bcf “to be completely wiped out and likely to flip to deficits after the next three EIA reports,” according to the forecasts.
“As opposed to cold snaps in recent winters, which have been brief and bookended by mostly warm weather, January is shaping up to be a full month of colder-than-normal weather across key population centers,” Huenefeld said. This will be verified with continued cold model runs and a 250+BCF withdrawal. This will set up the price action back up to the $4.200 level, and possibly beyond.
So, talking about beyond. As we look at the synoptic weather models, we look at modeling 3-6 weeks out. Up until late last week, the models were consistently showing the cold retreating back into northern Canada and the continuation of the Polar Vortex to relax to it's more circular pattern with the Northern Hemispheric winter weather season. The equatorial weather pulses, as telegraphed by the MJO, were also showing an injection of mild Pacific air into British Canada and the US Pacific North west. Which is common for a weak La NIna, which we are in. This was being modeled and seen for a warmer period from the end of January into the first 2-3 weeks of February. A general relaxation of the Polar Vortex, and the injection of mild Pacific air, was being accepted as a January thaw, typical of the winter season, and in a weakened La Nina state.
Remember that institutional investors, who we are competing against, are looking at the same information. They will begin planning on trading this information 10 days before the event happening. This is common in the energy markets. Trade the news 10 days before the little fish hear anything about it. Then sell the news of rumors that the little fish are talking about. Remember I was discussing the Polar Vortex and the opening of Plaques and Corpus Christi two weeks before there was any news on the wires. We joked about a PoLAr VOrteX, but doesn't seem so funny when it actually happens and pays out two weeks later. Back to the weather.
Last week, there were signs of another, 5th and 6th, elongated Polar Vortex, being seen in the long range model. Plus the EPO, a teleconnection that measures the pressure in the eastern Pacific ocean started to turn favorable. This is starting to show high pressure rebuilding over Alaska, which rotates clockwise and pulls air down from northern Canada and the Artic. Couple this with the Polar vortex splitting again in its elongated state. And now we are talking about another bout of cold artic air being injected into the US. Except we are seeing this shift westward over the highly populated centers of the US Midwest, as opposed to the US north east. I have attached some visuals which show the Polar Vortex the negative EPO in the models and an explanation of how they effect the weather. I will continue to monitor and update as they verify true or false. If they do, we can expect the Widow Maker contracts to bring life back to a bull market in NG. Now take that you B1t*H!!!
This brings us to the second factor in pricing, storage - injection and withdrawal. The expectation is for the first trillion cubic foot withdrawal for any month. If the warmer weather verifies and the 1 TCF verifies, which is the base case scenario, industry experts estimate that at the end of withdrawal season, the last week in March. That NG storage will be somewhere in the 1700-1800 BCF. Which will be the second lowest in 30 years and 550 BCF versus last winter. This coupled with the fact that Corpus Christi LNG facility is expected to open two more trains before April and Plaques running at full capacity, this could add another 1 BCF/ in demand. But this is all a big if. But something i will be watching out for daily.
I am non-committal about anything other than the next 5 days in the NG market. Which I see at higher prices than today. But I have and will be wrong, so do not take this as investment advice. Just where I see the upcoming fundamentals playing out. NG is the most volatile asset/commodity traded. So always expect a pullback on any bit of bad news after the price spikes, or pop up on any bit of good news after the price dumps. Has been and will always be the nature of NG. Again, why real time weather and industry news is so important.
My next post will be on what and where to look for the fundamental news to front run these pops and dips. All of the news is behind paywalls. But I speak from experience that every dollar spent pays for itself and then some. In the meantime I will throw you some fish as I hopefully teach you to fish yourself. An educated informed trader/investor makes the market more transparent, predictable and profitable.
So here's the new tagline. "Keep it burning boys!"
Nat Gas trading week 1/12-1/17This weekends weather models trended a little warmer versus the model data midday Friday. With a break in the cold to below normal HDDs over the US late this week but trended further colder with an Arctic blast into the US Jan 19-24. The weekend models showed the GFS had been 4-5 HDDs colder until warming up a bit in the latest midday Sunday run to finish less than 1 HDD changed versus Friday’s midday data. The EC, on the other hand, trended 10 HDDs colder, The Euro model now sits a full 17 HHDs colder than the US model for the time period.
The important thing to come out of this weekends model data is that enough cold artic air will be in place for the next three EIA reports to print withdrawals of 200BCF/week print three. It has been noted by industry experts that this could possibly be the first TCF withdrawal in a month ever. That is TCF, or Trillion Cubic Feet!!!!
Temperatures are expected to moderate later in January, sometime around the 25-26. Demand is expected to normalize after this period. Except the European model is showing a slowing of this. It is going to be watched very carefully if a new frigid organizes over Canada and discharges into the US again. Longer range models are beginning to show this possibility happening. With this being the third discharge of artic air this winter, the atmospheric trend could lay the ground work for future cold air.
I will post more on this later, which is my thinking for the second half of winters set up and direction.
But for now, production is coming back online in the Permian and Marcellus, after 6 BCF of freeze ins this past week. The big watch on the production side will be next weekend and the possibility of massive freeze in all the way down to south Texas and Louisiana coast. Which could possibly effect the LNG market, but in a bad way. Like last year and the disruption with Freeport and loss of production, before NG dropped down the $2.20. We will need to see production nominations early tomorrow am to verify gas flowing again after the moderation in temps this weekend. Another issue with production is Canadian imports, which are running the highest in record. With historic surpluses in Canadian storage, and 15% of production curtailed over the early December timeframe, the Canadian's have been turning the taps on to historic levels. SO a lot of news before the market opens tomorrow in NY. We have tonight's open, 0Z weather models, gas nominations for production and LNG exports, Canadian imports. All which have been other than normal lately.
As for the California fires, the only issue at hand is regional pricing spiking in the Southern California spot market, so no issues expected in production or supply.
I expect the market to gap higher at open tonight, if it does not, it is not because of weather or supply/demand balance. I also expect daily swings in the 20-30 cents, centered around model releases.
I have been inclined to believe that February will be warm, as statistically in the past 13 years it has been warmer than January. The peak HDD is around January 26-27, depending on being a leap year or not. But I am seeing and hearing otherwise, and I am continuing the research to verify that information. Remember we trade on weather which is 10 days out from the data released. So the direction of the market was determined 10 days ago when this period was verifying in the model runs 10 days ago. So, it is very important to look at the 3-6 week weather patterns, to begin to see where supply/demand fundaments will head. But more on that later.
NATGAS: Bearish Continuation & Short Signal
NATGAS
- Classic bearish setup
- Our team expects bearish continuation
SUGGESTED TRADE:
Swing Trade
Short NATGAS
Entry Point - 3.981
Stop Loss - 4.130
Take Profit - 3.669
Our Risk - 1%
Start protection of your profits from lower levels
❤️ Please, support our work with like & comment! ❤️
Nat Gas: Heating Up into the WinterBrief Overview on Natural Gas
Natural Gas is a commodity generally traded on the premise of weather forecasts indicating cooler or warmer seasons. This allows traders to speculate on demand for the product as it generally trades higher with cooler temperatures. Today we are looking at the weekly chart.
Thesis: Technical Analysis Pointing to a Bounce
This analysis is mainly focused on the lasting demand zone that Natural Gas time and time again respects and typically bounces from. The weekly chart points to the likelihood that the R/R is favorable for a long position at these levels in the 2.20's. Not only do we see NG tap back into this heavy demand zone, but we also can see a Cup & Handle on the weekly chart signaling potential greater upside.
Demand Zone offers strong R/R as it dips back in to these levels.
Cup & Handle can represent even further upside, but will rely on the initial rebound to prompt the possibility of it playing out.
There is also a trendline (not pictured) that is supporting the current bounce we are seeing today from the 2.18/2.19 level. It is important to note that the commodity has been seeing higher lows since the Spring.
Lastly, a tap of fundamentals play into this idea as well. Though winter demand is always priced in, this year forecasts have repeatedly painted the picture that this winter will be historically mild. Due to these forecasts implying less seasonal demand for Nat Gas, a shift in the shorter-term and more accurate models as we approach the winter season will sharply move the price of Nat Gas and represents that the current price is truly pricing in a very mild winter. This basis supports the idea of great R/R on this LONG trade idea.
Disclosure
I am currently in a long position in Natural Gas after entering on the Friday (10/18) Close
My position includes: AMEX:UNG Credit Spread 13/12P , AMEX:BOIL common shares
If this thesis holds up, I would plan to roll my credit spread contracts into further expirys
Thanks for reading!
Not Financial Advice
Natural Gas - Supply and DemandAs previously iterated in my writings on crude oil NYMEX:CL1! here and here , my opinion is that conditions favor a bull market in energy products. Crude Oil has gained a few points since the time of publishing, and Natural Gas NYMEX:NG1! appears poised to follow suit. As seen below, most energy markets ( NYMEX:CL1! , NYMEX:NG1! , ICEEUR:BRN1! , NYMEX:RB1! , NYMEX:MBA1! ) have rallied in the last year.
The most active, and volatile of the energy products shown in the above chart is Natural Gas $NYMEX:NG1!. There are many reasons it may have rallied since the 2nd quarter of 2020, such as an energy crisis in Texas, and war in Eastern Europe and the Middle East. Increasing up to 500% at one point in the last 5 years, though the price has backed off we still observe the market making new highs.
There are some very serious considerations in oil and gas, which do not appear to have been of any consideration. Just yesterday, US president Joe Biden elected to place a ban on all future leases on offshore drilling operations. Though he has cited a transition to clean energy as a suitable alternative, there is not much reason for markets to believe him. As mentioned, back in 2021 an unexpected cold snap in Texas led to panic in domestic energy markets as generators and suppliers were unable to meet demand. According to statistics published domestically all around the world including the USA, it is indicated that inflation has subsided as central banks lower rates. Yet as we can see, Natural Gas in the US in particular has continued to rally, and what's more the futures curve indicates market participants expect the price to continue to rise into 2027. This is in spite of the increasing strength of the US Dollar TVC:DXY , which may weigh against the price of Natural Gas.
www.bruegel.org
In Europe, the situation surrounding the availability of energy products may be even more alarming. Ukraine has elected to not negotiate terms for an extension of a natural gas contract with Russia. There are many pipelines from Russia which supply much of Europe with natural gas, both offshore and through Ukraine. Much of which will have passed through Ukraine and Belarus, since the sabotage of the Nordstream pipelines. As such much of Europe's energy in the last couple years has been Suppled by the USA, though a significant sum from Russia has continued to be supplied through Ukraine. Considering that the US has just made the decision to reduce it's future supply of natural gas, it seems unlikely that it will be able to supply Europe at the same price.
In terms of future uncertainty, we can also look at Canada. A major supplier of energy products globally, Prime Minister Justin Trudeau has decided to step down, though an election is not slated until October. With Donald Trump taking office in just 13 days, and threatening tariffs, we might anticipate the lack of clear governance over continental trade will have a negative impact on the stability of natural gas markets. In face of volatility and a decreased future demand, North-American as well as European energy markets seem poised to take a strong bullish stance.
Besides pipelines, a great deal of import/export in natural gas is done in Liquid Natural Gas (LNG). Due to violence in the Red Sea, carriers of LNG in particular have opted to take the longer route around the horn of Africa. The politics surrounding commercial maritime shipping have become very complicated in the last year, between terrorist attacks, union strikes, blocked shipping lanes and an (allegedly) poor prognosis for the Panama Canal. Which is to express, without bearing too heavy on details of the politics of maritime law, that the future has become uncertain. Since 2022 interest rates have been rising, and as such commercial shipping insurance rates have been rising, war clauses notwithstanding. Since insurance companies are at liberty to play politics, it should leave no doubt in a speculators' mind that they will. Already lobbying efforts have begun to remove EU sanctions on Russian oil exports, for the effect they have had on oceanic insurance. This issue is further discussed in my first post on crude oil. See below the price of Natural gas in the UK over the last year.
Natural gas consumption worldwide has been on the rise for the past several decades, as it is sought after as a cleaner and cheaper alternative to crude oil derivatives. It must be considered that beyond supplying energy to the public, this commodity plays an important role in industrial processes and manufacturing. The effect of a reduced supply encompasses a gross majority of the global economy. In fact it is so obvious that the price will rise, the only bear argument I can surmise might be a global conspiracy against energy and the trading of energy products, thus rendering their useless and of little worth. Given the sweeping measures imposed by Biden just 14 days before the end of his presidency, traders should beware of capital controls imposed on these markets. While I am wholly bullish on this market, on every basis from technical to fundamental, it is a SERIOUS risk that trading in these markets will be prohibited through political measures. Sovereign debt is mounting, and inflation threatens to critically exacerbate the issue of interest rates.
That being said, markets are markets. Thanks for reading.
"It ain't what you don't know that gets you in trouble, it's what you know for sure that just ain't so"
-Mark Twain
Will Europe's Gas Gambit Reshape the Global Energy Landscape?In a bold move reverberating across global energy markets, Ukraine's decision to halt Russian gas transit on New Year's Day 2025 has ushered in a new era of energy geopolitics. This watershed moment not only challenges decades-old supply patterns but also tests Europe's resilience and strategic foresight in securing its energy future. The immediate market response, with gas prices surging to levels unseen since late 2023, underscores the significance of this pivotal shift.
Against this backdrop of uncertainty, Norway's Troll field has emerged as a beacon of hope, setting unprecedented production records and demonstrating Europe's capacity for strategic adaptation. With production reaching 42.5 billion standard cubic meters in 2024, this achievement showcases how technological innovation and operational excellence can help reshape traditional energy dependencies. Meanwhile, BMI's forecast of a 40% price increase for 2025 signals the complex interplay between supply disruptions, growing demand, and market expectations.
The transformation of Europe's energy landscape extends beyond mere supply chain reorganization. While countries like Slovakia, Austria, and Moldova face immediate challenges in securing alternative gas sources, the broader European response highlights a remarkable shift in energy security strategy. With storage facilities maintaining robust levels and infrastructure upgrades underway, Europe's energy transition demonstrates how geopolitical challenges can catalyze innovation and strategic resilience in the global energy sector.
Nat Gas: Trading the WeatherNYMEX: Micro Henry Hub Natural Gas Futures ( CME_MINI:MNQ1! )
On December 31, 2024, the lead contract of NYMEX Henry Hub Natural Gas futures closed at $3.6330 per MMBtu. This marked a strong gain of 44.5% year-over-year, making it the best performing active futures contract for the year.
Nat Gas is one of the most actively traded commodities. According to CME Group:
• Henry Hub booked record trading volume in 2024. Average daily volumes for futures and options were 566,000 and 242,000 contracts, respectively.
• As of last Friday, Open Interests were 1,511,978 for futures and 775,176 for options.
The Basic
Natural gas is a leading energy source for global economy. While clean energy generates a lot of buzz these days, natural gas still carries the biggest load in power generation. The U.S. Energy Information Administration (EIA) estimates U.S. electricity production at 4.18 trillion kilowatt-hours in 2023.
• About 43.1% of the electricity was generated by natural gas.
• Nuclear power contributed to 18.6%, while coal had a 16.2% share.
• Combined, Renewables accounted for a 21.4% share, including 10.2% from Wind, 5.7% from Hydro, and 3.9% from Solar.
The price of a commodity is determined by its supply and demand. In the case of electricity, it is hard to store while its demand is highly unpredictable. New storage technology is limited by capacity and high cost. With Nat Gas being the biggest energy source, unforeseen changes in power demand could send shock waves into the market.
Weather factors, in particular temperature, have the biggest impact in power demand.
• In the summer months, the biggest power usage is for air conditioning cooling. Cooling Degree Day (CDD) is the number of days in a month where the average daily temperature is above 68 degrees Fahrenheit.
• In the winter months, the biggest power usage is for heating home and offices. Heating Degree Day (HDD) is the number of days in a month where the average daily temperature is below 68 degrees Fahrenheit.
Energy traders deploy CDD/HDD analysis and weather forecast models to predict temperature trends, electricity demand and the subsequent natural gas use.
The Weather Shocks
On December 29, 2024, the Weather Co. and Atmospheric G2 released a weather forecast for January showing colder than average temperature in the East, specifically from Florida to Maine as well as certain parts of the Great Lakes.
In a separate report, AccuWeather meteorologists said that the colder air could trigger a winter storm with substantial snow and ice for a significant portion of the month’s first half. They added that the drop will begin in the middle and latter part of next week.
When the futures market opened the next day, the price of Henry Hub futures surged 20%, hitting a new 52-week high of $4.20.
Earlier in the winter, Germany experienced the so-called “Dunkelflaute” with no wind and a clouded sky. This is the worst scenario for wind and solar power. As Germany is heavily reliant on renewable energy, when the weather fails to cooperate, its power supply drops by half, sending electricity prices sky high.
The huge supply gap prompted energy companies to turn on gas-fueled backup power plants, pushing the Dutch TTF ( NYMEX:TTF1! ) natural gas contracts to a record high.
At the time of this writing, severe winter storms are sweeping across the Central Plains in the U.S., bringing heavy snow, sleet, and frozen rain from Kansas to Missouri, Illinois, Indiana, Kentucky, Ohio and Washington, D.C. Apart from the winter hazards, I expect higher power consumption to keep people warm from the below-average temperatures.
Trading with Micro Henry Hub Futures
Micro Henry Hub natural gas futures (MNG) offer smaller-sized versions of CME Group’s liquid benchmark Henry Hub futures (NG) contracts. The Micro futures have a contract size of 1,000 MMBtu, which is 1/10th of the standard contract. The Micro contracts allow traders to control a large contract value with a small amount of capital.
With Friday settlement price of $3.354, each February contract (MNGG5) has a notional value of $3,354. Buying or selling one contract requires an initial margin of $366.
Since its Monday high, Henry Hub prices have plunged 20%. Subsequent updated weather forecasts now predicted warmer trends for the Eastern US, which could curb heating demand for Nat Gas. Losses accelerated last Friday after the EIA reported that Nat Gas inventories for the week of December 27th fell -116 bcf, a smaller draw than expectations of -128 bcf.
In my opinion, the draw was lower due to the reduced economic activity around the Christmas holiday. For the same token, we could see a smaller draw during the New Year. However, I consider this data seasonal outliners, rather than a longer-term trend.
Global warming doesn’t necessarily mean warmer winters. Higher global temperature brings moisture from the ocean, with wetter atmosphere generating more extreme weather events. I expect winter temperature patterns to shift to much colder-than-normal, with cool anomalies poised to stick around key population centers deep into the winter.
As we have seen in the past, unpredictable weather events could send large shocks to natural gas prices. With Micro Henry Hub contracts, traders could potentially realize sizable gains with a small capital requirement.
Hypothetically, if the February prices move up 10% to $3.689 with lower temperature forecasts, the $0.3354 price gain would translate into $335.4 for a long futures position, given the contract size at 1,000 MMBtu. Using the initial margin of $366 as a cost base, the trade would produce a theoretical return of 99.6% (=335.4/366).
The long futures position would lose money if Nat Gas prices continued to trend lower.
Happy Trading.
Disclaimers
*Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
NG1! SENDS CLEAR BULLISH SIGNALS|LONG
Hello, Friends!
NG1! pair is in the uptrend because previous week’s candle is green, while the price is obviously falling on the 9H timeframe. And after the retest of the support line below I believe we will see a move up towards the target above at 3.928 because the pair is oversold due to its proximity to the lower BB band and a bullish correction is likely.
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