Natural Gas Update: Will Seasonality Rule This Year?

| September 16, 2015

Natural Gas Update: Will Seasonality Take The Market Higher?

Despite historic volatility in equities the past few weeks, the natural gas market has been decidedly ho-hum.  In fact, I’d venture to say trading in the commodity is akin to watching paint dry.

Take a look for yourself…

Natural Gas Update, a chart of natural gas

As you can see, natural gas has been stuck in a choppy trading range around $2.70 mmBtu since mid-August.  Even though temperatures have been rather warm in key natural gas usage regions the past few weeks, investors seem content with letting prices dwindle.

But that may change soon…

You see, we’re entering the most bullish time of the year for natural gas.

According to a 20-year seasonality study, natural gas tends to bottom in early September and rally through late December.  This seasonal rally comes to fruition because investors start pricing in the high demand winter heating season, which is right around the corner.

Will a seasonal rally take hold this year?

While it’s tempting to embrace the strong odds behind seasonal trends, we have to be mindful of the current supply/demand balance.  According the US Energy Information Administration (EIA), the market is still very well supplied.

In fact, for the week of August 28th, there were 3,193 billion cubic feet (bcf) of supply in US storage caverns.  That’s 4% higher than the 5-year average and 18.3% higher than last year.

Clearly, US natural gas explorers are still producing the commodity at a remarkable pace.

Here’s the deal…

In order for a sustainable natural gas rally to take hold, we need to see two things occur. 

First of all, overall US natural gas production must slow meaningfully.  And secondly, new demand must come online that’s capable of reducing inventories substantially.

While we haven’t seen either of these factors happen just yet, we’re likely on the cusp of it.

How so?

I won’t get into all the nitty gritty details today.  However, I am putting the finishing touches on a new report that outlines the potentially profitable situation in natural gas.

With the commodity trading near multi-year lows under $3, it will only take a few slight fundamental adjustments to send it sharply higher.

Under the right circumstances, we may see natural gas rally 50% or more from current prices.

Be on the lookout for this FREE report as it will hit the Commodity Trading Research website soon!

Until Next Time,

Justin Bennett
Commodity Trading Research

BIO:  Justin Bennett is the head commodity research analyst at Commoditytradingresearch.com.  With over a decade of real world trading experience, he finds ways for you to consistently profit from movements in commodities and the companies producing them.  Sign up for our free reports and commodity newsletter at http://commoditytradingresearch.com/free-sign-up.

Tags: , , , ,

Category: Commodities

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.

Comments are closed.