Natural Gas Prices Rise Despite Bearish Market
Natural gas prices rose unexpectedly today after a lengthy downtrend has pulled the market down to historic lows.
Quick overview
- Natural gas prices rose 2.38% on Wednesday, breaking a downward trend that has persisted since mid-July.
- Despite the recent upswing, the market is expected to remain bearish due to well-stocked reserves and mild weather conditions.
- The current price of $3.0815 follows a low of $2.895, indicating a challenging market environment reminiscent of last October.
- Investors are likely to adopt a wait-and-see approach, as the market may experience short-term rallies but is expected to remain low in the long term.
The price of natural gas rose 2.38% on Wednesday even though the market had been trending downward since mid-July, and we speculate that the price will correct soon.
We could be at the start of a short rally with natural gas futures, as they are climbing more than 2% even though the larger trend for the past two weeks has been downward. It is expected that the current upswing will not last long, especially since gas reserves are well stocked.
During this week, natural gas hit a low of $2.895, and although the current price is $3.0815, this remarkable low is bad news for the market. The last time the market trended so low was all the way back in October of last year. The weather has been relatively mild, oil supplies have not been under attack in recent months, and shipping lanes have been relatively free from disaster. Add all of that onto the already well stocked reserves and you have the perfect storm for extremely low prices.
Indecision Period for Natural Gas
Wednesday’s surge could be the turning point for gas prices, pulling them out of their doldrums, but that is not very likely. Instead, the current level is more likely to be a period of indecision where investors shy away from making big investments in order to better gauge the market. We anticipate a wait-and-see attitude from most investors at this point, since the upward trending market is likely to scare them off.
The market may rally in the short term, helped along by the unexpectedness of the upswing. However, the fact that the commodity is so close to a major support level around $2.885 shows that sentiment is poor for natural gas at the moment. Of course, that will all change in the coming months as the market prepares for winter and the widespread need for natural gas to combat the cold.
The long-term trend is looking bearish for the market, at least until partway into the fall months. Both medium and long-term natural gas prices are likely to remain low unless a major factor influences the market.
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