Natural Gas: Limited Upside Indicates Wobbling Likely to Continue
2024.12.24 09:18
Upon analysis of the movements of the natural gas future in different time frames, I find the reasons behind the limited upside due to prevailing geo-political moves indicating a tough time for the traders since the announcement of milder weather ahead.
Natural gas futures have been trading amid bearish territory since this weekly opening, as I predicted in my last analysis ( ) on Dec. 20, 2024.
Impact of the statement by US President-elect Donald Trump on ‘Higher Tariffs’ for the European Union if it does not purchase more and more and gas from the US.
Secondly, Russian gas supply to European countries could be disrupted. Ukraine has said it will not renew a five-year deal to pipe Russian gas to Europe, which is about to expire at the end of the year, as it does not want to aid Moscow’s military effort.
On the other hand, milder weather reports could keep natural gas prices under bearish pressure, which may keep the demand for natural gas on the lower side.
Moreover, several producers reduced drilling activities this year after monthly average spot gas prices at the U.S. Henry Hub benchmark in Louisiana plunged to a 32-year low in March and remained relatively low for months after that.
This reduction in drilling activity should cause U.S. natural gas output to decline for the first time since the COVID-19 pandemic cut demand for the fuel in 2020.
In such a scenario, look ready to see more downside from the current levels if breakdown below the significant support at $3.093.
Undoubtedly, any significant change on the energy front after the entry of newly elected President Donald Trump on Jan. 20, 2025, could provide further clues for deciding the direction of natural gas prices. Till then, the natural gas futures could remain extremely volatile amid hopes and assumptions.
Technical Analysis: Levels to Watch
On the weekly chart, natural gas futures faced stiff resistance at 200 DMA at $3.863 in the last week. This week’s movement indicated a continuity of selling spree as natural gas futures could not even cross the immediate resistance at $3.556 amid fear of milder weather expectations and other geo-political concerns ahead.
On the daily chart, natural gas futures hit a low at $2.675 on Dec.16 before bouncing back up to $3.546 on Dec.23 but remain under selling pressure, which indicates the bears are commanding the whole scenario.
On the 4 Hr. Chart, natural gas futures look ready to move downward as the 9 DMA has tilted downward and has moved below the 20 DMA, resulting in the formation of a ‘Bearish Crossover’.
Live Chart Analysis: Watch live analysis of the natural gas futures in my upcoming YouTube video on Dec.25, 2024, on my YouTube channel ‘SS Analysis’.
Disclaimer: Readers are requested to create any position in natural gas at their own risk as this analysis is purely based on observations.
