Will the Weakness in Natural Gas Continue?



Natural gas prices

On March 11, natural gas April futures rose 0.4% and settled at 2.784 per MMBtu (million British thermal units). On the same day, natural gas prices closed at the second-lowest level since February 22.

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Will the weakness in natural gas continue?

On March 12, Refinitiv data estimated that the natural gas demand will fall by 0.8 Bcf (billion cubic feet) per day next week in the Lower 48 states—compared to earlier estimates of 89.1 Bcf per day on March 11. On March 12, the expected total degree days for the next two weeks fell below the 30-year normal, which indicates continued warmer weather. The weakness in natural gas prices might continue despite the expectation of bullish inventory data.

This week, the U.S. Energy Information Administration might report a decline close to 200 Bcf, which we’ll discuss in Part 3.

Natural gas moving averages

On March 12, natural gas active futures were 4.6%, 17.9%, and 11.8% below their 50-day, 100-day, and 200-day moving averages, respectively. When natural gas is below these key moving averages, it indicates weakness in the prices.

On March 5, natural gas’s 50-day moving average was 7.5% below the 200-day moving average. In technical terms, if the 50-day moving average falls below the 200-day moving average, the crossover is called a “death cross.” Usually, a death cross is followed by more weakness, which happened with oil.

Natural gas–weighted stocks like Chesapeake Energy (CHK), Antero Resources (AR), and Cabot Oil & Gas (COG) might be in trouble if natural gas prices retreat from the current levels. Broader market indexes, like the S&P 500 Index (SPY), would likely be impacted by any changes in natural gas prices.


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