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The Smell of Natural Gas: Ripe for a Pullback?

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Oct. 19 2017, Updated 11:57 a.m. ET

Natural gas

On October 18, 2017, natural gas (UNG) (BOIL) (FCG) November futures closed at $2.85 per MMBtu (million British thermal units)—3.6% below the last trading session’s closing price. The mild weather forecast could be behind the large plunge in natural gas prices.

Between October 11 and 18, 2017, natural gas futures fell 1.2%, while the S&P 500 Index (SPY) and the Dow Jones Industrial Average Index (DIA) rose 0.2% and 1.2%, respectively. US crude oil (USO) futures rose 1.3% during this same period.

The mixed sentiment in energy prices could be of less importance for these equity indexes because oil could have a higher impact than natural gas prices over this short-term period.

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Moving averages

On October 18, 2017, natural gas active futures were 3.1%, 3.6%, 3.7%, and 6.2%, below their 20-day, 50-day, 100-day, and 200-day moving averages, respectively. On the same day, the 50-day moving average was 2.7% below the 200-day moving average.

All of these technical indicators point to bearish sentiment for natural gas prices. Further expansion in the differences may decrease the possibility of a pullback in natural gas prices.

In the next parts of this series (below), we’ll discuss some important factors that could affect natural gas supplies. We’ll also analyze the natural gas inventory level and try to explain its impact on natural gas prices.

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