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Will Natural Gas Recover from Its Three-Year Low?

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Natural gas and energy stocks

On June 4, the natural gas July futures rose 0.5% from the lowest closing level in three years and settled at $2.416 per MMBtu (million British thermal units). On June 4, Gulfport Energy (GPOR) and Antero Resources (AR) rose 7.9% and 5.2%, respectively. They were the outperformers among natural gas–weighted stocks.

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Will natural gas recover?

In the trailing week, natural gas prices have fallen 6.5%. Going forward, natural gas supplies could rise. The oil rig count is expected to increase. The EIA’s inventory report might not help natural gas prices increase this week. On June 3, natural gas’s implied volatility rose to 29.7%—the highest level since February 11. The rise in the implied volatility indicates that traders expect a sharp move in natural gas prices.

In this year’s injection season, the outage at Cheniere Energy’s Sabine Pass liquefied natural gas export terminal in Louisiana in April made natural gas weaker. Any rise in the summer temperatures might benefit natural gas prices. Natural gas will be burned to supply power to air conditioners in the US.

Key technicals

On June 4, the natural gas active futures were 6.5%, 7.4%, 11.9%, and 21.7% 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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