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Natural gas pullback brings potential buying opportunity


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Natural gas pullback brings potential buying opportunity

Natural gas has seen a rare pullback this week, but the ongoing uptrend and expectations of rising winter demand signal a potential buying opportunity.

bg_gas_pipes324383736.jpgSource: Bloomberg
 Joshua Mahony | Senior Market Analyst, London | Publication date: Thursday 30 September 2021 

Natural gas on fire over the course of 2021

Natural gas has been one of the biggest outperformers in a highly volatile commodity market, with the energy markets really gaining traction into a crucial winter period.

Demand is likely to continue its uptrend going forward as temperatures drop, with the chart below highlighting how we typically see residential consumption surge over the winter period.

NAT_GAS_CONSUMPTION.pngSource: US EIA

 

Meanwhile, that rise in demand puts pressure on supplies, with any ongoing struggles from a supply perspective likely to dial up in the coming months.

NAT_GAS_STORAGE.pngSource: US EIA

Pullback brings potential buying opportunity

The wider chart highlights just how impressive this bull run has been, with the price of natural gas bringing us into a seven-year high.

While we are obviously heavily stretched, it makes sense to expect this to continue until price tells us otherwise.

NG-Weekly30921.pngSource: ProRealTime

 

The intraday chart highlights how we have seen a sharp decline this week, providing a potential opportunity for bulls. A break below the $47.60 level would bring a more neutral/bearish outlook for the near-term.

However, until that happens this latest 61.8% Fibonacci retracement provides us with a potential buying opportunity within a remarkably reliable uptrend.

NG-4-hours30921.pngSource: ProRealTime
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