prices surged in response to increasing signs of a global energy shortage at the start of the northern hemisphere winter heating season. Futures started this week with a gap-up in a follow-up move to the last trading session of the previous week. Undoubtedly, the current rally started in the aftermath of Hurricane Ida which damaged production facilities in the US.
Then sentiment turned bullish resulting in the natural gas price testing a seven-year peak of $5.644 on Sept. 15. The majority of natural gas traders hoped that natural gas would test the next psychological resistance of $6.
Undoubtedly upward moves by futures found some resistance at previously tested levels in the middle of September but remain near the seven-year peak.
In addition, China and Europe started to increase their stores of natural gas at any cost to fulfill growing demand ahead of their winter. This increased competition has propelled natural gas higher and I think that the sudden surge in coal prices may also be a result of demand for power ahead of the winter.
I do not expect the upcoming winter to be so severe that it will result in more Heating Degree Days. If Natural Gas futures do not remain above $5.644, a steep slide could follow driving prices down towards $4.931.
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Disclaimer: This analysis is purely based on the technical observations. I do not have any position in Natural Gas. One can create position in Natural Gas at his/her own risk.