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Natural Gas Bears Might Enjoy a Short Position from This High

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Natural gas prices

On September 18, natural gas October futures rose 4.2% and settled at $2.933 per MMBtu (million British thermal units)—the highest closing level for active natural gas futures since August 23.

In the previous trading session, Antero Resources (AR), Gulfport Energy (GPOR), and Chesapeake Energy (CHK) rose 2.8%, 3.8%, and 3.8%, respectively, and outperformed other natural gas–weighted stocks. On September 18, the United States Natural Gas ETF (UNG) and the ProShares Ultra Bloomberg Natural Gas ETF (BOIL), which follow natural gas futures, rose 3.8% and ~7.5%, respectively.

On September 18, the S&P 500 Index (SPY), the S&P 400 Mid-Cap Index, and the Dow Jones Industrial Average Index (DIA) rose 0.5%, 0.4%, and 0.7%, respectively. The oil and gas constituents of these equity indexes could be impacted by movements in energy commodities.

Natural gas prices could be important to integrated energy stocks like ExxonMobil (XOM) and Chevron (CVX). Their upstream businesses operate with a production mix of ~39% in natural gas.

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Natural gas bears might enjoy a short position

The expectation of higher demand might be behind the rise in natural gas prices. This week, US natural gas consumption is expected to be at 81.7 Bcfpd (billion cubic feet per day) compared to earlier estimates of 80.7 Bcfpd, according to estimates from Reuters analysts. However, the demand might fall to 78.2 Bcfpd next week, which might be a concern for higher natural gas prices this week.

The EIA’s inventory data, scheduled to be released on September 20, might also dismay natural gas bulls, which we’ll discuss in Part 3 of this series. These factors might support short positions on natural gas prices. On the downside until September 21, the closing level of $2.74 will be important for natural gas traders.

Important price points

On September 18, natural gas active futures were 2.6%, 3.2%, 2.6%, and 3.5% above their 20-day, 50-day, 100-day, and 200-day moving averages, respectively. These moving averages will likely be important support zones for natural gas prices.

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