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Will Natural Gas Continue to Fall?

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Natural gas and energy stocks diverged

On June 18, natural gas July futures fell 2.4% and settled at $2.33 per MMBtu (million British thermal units). On the same day, Chesapeake Energy (CHK) and Gulfport Energy (GPOR) rose 3.8% and 1.8%, respectively. Most of the natural gas–weighted stocks ended in the green. A rise of 1.2% in US crude oil prices might be behind this divergence.

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Will the fall continue?

According to Refinitiv data, the total demand in the lower 48 US states for the next week could rise by 4.1 Bcf (billion cubic feet) per day from the expected demand of 81.6 Bcf this week due to warmer temperatures. Next week, natural gas supplies in the US could rise to 97.3 Bcf per day from the expected level of 96.5 Bcf per day this week. Demand outpacing supply might help natural gas prices recover.

This summer, given a possible rise in the oil rig count, we could see an increase in the natural gas supply. The EIA’s inventory data on June 20 might help extend the losses in natural gas prices. In the trailing week, natural gas fell 3%.

Key technicals

On June 18, the natural gas active futures were 4.6%, 7.8%, 11.7%, and 23.6% below their 20-day, 50-day, 100-day, and 200-day moving averages, respectively. Natural gas below these key moving averages indicates weakness in the prices.

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