Price Continues to Benefit from Warmer Weather, Eyes on $4.00

Natural Gas, Commodities, Oil – Talking Points

• Natural gas prices continue to coil below $4.00, trendline support below
• National weather forecasts calling for temperatures to drop from current levels
• Potential formation of tropical storm in the Gulf of Mexico threatens demand, production

Natural gas prices once again flirted with the key $4.00 level on Wednesday before retreating. Natural gas futures have roared higher of late as most of America experiences a hotter summer than expected. Parts of Texas and the Southwest continue to experience temperatures of 100+, highlighting the increased demand for natural gas products. The National Oceanic and Atmospheric Administration has also revealed its forecasts that temperatures are expected to remain warmer than normal over the next two weeks.

Risks do remain for the natural gas market, particularly in the form of large storms. The potential formation of a tropical storm in the Gulf of Mexico poses a threat to natural gas production. Energy consumption and supply lines along the Southern Coast of the United States may also take a hit. The development of severe weather throughout the gulf, coupled with forecasts of a cooler September highlight potential downside risks for natural gas prices. Despite total supply remaining steady, demand continues to be very strong for natural gas products.

National Temperature Map

Courtesy of the National Weather Service

Having fallen below that key psychological level, it would appear that a breakout may be contained by that imaginary barrier. Price has gyrated between $4.00 resistance and an ascending trendline from January providing support. Following a brief retest of the 50-day moving average on August 19, price has remained in an uptrend, making higher highs each day. A retest of the early-August swing high of 4.205 may be on the cards should natural gas futures make a sustained break above the $4.00 barrier. Cooler weather, tropical storms, and numerous other headwinds could see natural gas retreat to a key support zone around 3.800.

Natural Gas Futures Daily Chart

Chart created with TradingView

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— Written by Brendan Fagan, Intern

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