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Trading Natural Gas


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Hello, beginner here, still have my trading training wheels on. 

I'm looking into Natural Gas as it appears to frequently have some interesting price action and I was wondering if anyone here more experience trade it on a regular basis. I would be interested to know what strategy you use or what you look out for or good news sources for market trends.

From what I can see there regularly seems to be a sharp increase in volume at around 7pm. What is behind this? I understand the Natural Gas Report comes out on a Thursday in the USA and that supposedly has an impact on the market but I'm not seeing a notable correlation as yet but I might be looking at it wrong. I'm doing research on how to interpret the Natural Gas Report data but for now I understand it effectively shows supply and demand.

So far I've tried one trade so where I tried to short it but hit my stop loss by a sudden wick spike before it eventually fell down to the price level I was hoping to close at. I'm doing a bit more bit more reading up before I jump into my next trade. 

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Just looking at the charts today. The 50MA is getting close to the 100MA. If these cross, it could be a good short opportunity. Price is just above 4000  (a resistance level recently turned support). Perhaps the price will fall below this or maybe we will see a bounce. 

Edited by ecou
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1 hour ago, ecou said:

Hello, beginner here, still have my trading training wheels on. 

I'm looking into Natural Gas as it appears to frequently have some interesting price action and I was wondering if anyone here more experience trade it on a regular basis. I would be interested to know what strategy you use or what you look out for or good news sources for market trends.

From what I can see there regularly seems to be a sharp increase in volume at around 7pm. What is behind this? I understand the Natural Gas Report comes out on a Thursday in the USA and that supposedly has an impact on the market but I'm not seeing a notable correlation as yet but I might be looking at it wrong. I'm doing research on how to interpret the Natural Gas Report data but for now I understand it effectively shows supply and demand.

So far I've tried one trade so where I tried to short it but hit my stop loss by a sudden wick spike before it eventually fell down to the price level I was hoping to close at. I'm doing a bit more bit more reading up before I jump into my next trade. 

Hi @ecou

Welcome to the IG Community. Have a look at the blog below:

RESOURCES TO HELP YOU TRADE NATURAL GAS

Beginner and advanced traders alike can benefit from the many resources DailyFX provides to inform trading strategies and improve confidence when trading commodities, such as Natural Gas:

  • Stay up to date with live Natural Gas prices using our live chart and latest news.
  • Discover the main natural gas importing and exporting countries via our interactive global commodities page.
  • Bookmark our Economic Calendar to stay informed of up to date storage figures or events which could influence natural gas prices.
  • Tune in to our Live Webinars for live access to our DailyFX experts discussing trading strategies, tips, news and forecasts.
  • Learn more about technical analysis via our comprehensive education library

I hope this helps.

 

All the best - MongiIG

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1 hour ago, ecou said:

Just looking at the charts today. The 50MA is getting close to the 100MA. If these cross, it could be a good short opportunity. Price is just above 4000  (a resistance level recently turned support). Perhaps the price will fall below this or maybe we will see a bounce. 

Hi @ecou

Natural Gas Prices Surge Over 13% with Colder Temperatures Set to Sweep Across the US

 

NATURAL GAS, ENERGY PRICES, INFLATION, COMMODITIES – TALKING POINTS

  • Natural gas futures shoot 13% higher on expectations of colder weather
  • Storms are expected to hit the South, then begin to move to East Coast
  • Inventories report slated for Thursday, market expecting largest draw in 11 months
Natural Gas Futures Price - Investing.com India

Natural gas prices shot higher on Wednesday as forecasts for colder weather across the US are expected to increase demand. Henry Hub futures traded higher by more than 15% before backing off slightly. Futures contracts in New York settled at $4.857 per million British thermal units (MMBtu). The drastic move higher was fueled by revised weather forecasts which show colder temperatures sweeping across the East Coast over the next couple of weeks. Wednesday’s explosive move higher saw U.S. natural gas futures trade at their highest price since November.

US WEATHER FORECAST (10-15 DAY)

Natural Gas Prices Surge Over 13% with Colder Temperatures Set to Sweep Across the US

Courtesy of HFI Research

After rising sharply throughout 2021, natural gas prices dropped 36% in the fourth quarter. Price came under pressure from the emergence of the Omicron variant, as well as warmer-than-average seasonal temperatures across the United States. Despite the drawdown in Q4, natural gas prices finished 2021 up 47% on the year. The strong rally on Wednesday may be the “perfect storm” as colder temperatures mixed with lingering supply inefficiencies and traders potentially looked to cover short positions.

US NATURAL GAS FUTURES DAILY CHART

Natural Gas Prices Surge Over 13% with Colder Temperatures Set to Sweep Across the US

Chart created with TradingView

 

With a strong winter storm expected to sweep across the South in the coming days and then make its way up the East Coast, price may continue to squeeze higher. Weather, which has little impact on the market throughout the fall, now looks set to take center stage. Market participants may also look to Thursday’s EIA report on inventories. Currently, analysts are expecting the largest draw on reserves since February 2021.

Commodities broadly rallied on Wednesday following the release of the U.S. CPI data. The hot inflation print saw both WTI and Brent Crude continue to rally away from the $80/bbl level. Rising oil and natural gas prices could renew fears among U.S. consumers, who may soon feel the pinch at the pump. With European and Asian energy prices already at elevated levels, risks for the cheaper U.S. energy market could remain skewed to the upside.

 

Written by Brendan Fagan, Intern. DailyFX

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On 17/01/2022 at 06:58, ecou said:

Just looking at the charts today. The 50MA is getting close to the 100MA. If these cross, it could be a good short opportunity. Price is just above 4000  (a resistance level recently turned support). Perhaps the price will fall below this or maybe we will see a bounce. 

Thank you for all the links and info @MongiIG.

The price was largely neutral on Monday and Tuesday. The price now sitting on the 200MA with the 50MA below the 100MA now. Temperatures in the USA looking to fall on Friday but longer term outlook is mild in certain areas but tensions between Europe and Russia still lurk bringing in potential for volatility.

If the 200MA support is lost precedence would suggest a good shorting opportunity. 

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36 minutes ago, ecou said:

Thank you for all the links and info @MongiIG.

The price was largely neutral on Monday and Tuesday. The price now sitting on the 200MA with the 50MA below the 100MA now. Temperatures in the USA looking to fall on Friday but longer term outlook is mild in certain areas but tensions between Europe and Russia still lurk bringing in potential for volatility.

If the 200MA support is lost precedence would suggest a good shorting opportunity. 

Hi @ecou

You are welcome. Thank you for sharing the analysis above.

Interesting to see how natural gas will react tomorrow (Thursday 20th Jan 2022), EIA natural gas stocks change at 15:30 GMT.

image.png

SUMMARY

Natural Gas Stocks Change refers to the weekly change of the natural gas supply situation.

image.pngsource: Investing.com

 

While it is a U.S. indicator, it tends to have a larger impact on the Canadian dollar because of Canada's large energy sector.

If the increase in natural gas inventories is more than expected, it implies weaker demand and is bearish for natural gas prices. The same can be said if a decline in inventories is less than expected.
If the increase in natural gas is less than expected, it implies greater demand and is bullish for natural gas prices. The same can be said if a decline in inventories is more than expected. source: Investing.com

 

All the best - MongiIG

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Hi all, Got a successful trade on my demo account. 

Looking at NG to continue its upward trend to move back above the 50MA and 100MA and eventually retest 4000. Opened a position at 3825 with stop loss at 3740 and a target of 3965 (not ideal risk/reward ratio sadly). Position opened after moving above the 50MA. Went above the 100MA, fell back, then pumped back above the 100MA during the 7pm high volume spike, I closed the position at 3915 for £225 (£2.50/point). 

Upward trend looks to continue setting higher highs and higher low on the hourly since Thursday.

NG - LONG 20220124.jpg

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1 hour ago, ecou said:

Position opened after moving above the 50MA. Went above the 100MA, fell back, then pumped back above the 100MA during the 7pm high volume spike

Hi @ecou

Natural gas prices retreated sharply on Wednesday as U.S. traders positioned themselves ahead of Thursday’s eagerly awaited inventories report. The current street consensus is predicting a 173 Bcf (billion cubic feet) draw from U.S. stockpiles, as cold weather batters the Midwest and the Northeastern sections of the United States. Wednesday’s decline saw natural gas futures close below the key 200-day moving average, potentially hinting at more pain for LNG (liquid natural gas) in the days ahead. However, price was able to hold above the key psychological $4.00 level, which could act as near-term support and fend off any potential drops.

Despite the cooldown of natural gas prices throughout the second half of 2021, energy prices remain top of mind for politicians in Washington. In a press conference on Wednesday, President Joe Biden reaffirmed his commitment to getting more oil supply to the market. This comes as WTI and Brent crude continue to power higher above $85/bbl.

Despite a relatively mild winter, risks remain for LNG. Bouts of colder weather and a relatively tight supply could exacerbate any price increases over the coming weeks. Global LNG prices also face significant pressure from the ongoing situation in Eastern Europe. The Nord Stream 2 Pipeline continues to be the center of attention, with many Western nations hinting at blocking completion of the project should Vladimir Putin elect to invade Ukraine.

NATURAL GAS FUTURES DAILY CHART

Natural Gas Prices Fall by 5% as Traders Look to U.S. Inventories Report

Chart created with TradingView

European natural gas prices retreated Wednesday as well, as rumors spread that supply from China could saturate the markets in the near-term. European LNG futures fell by as much as 8.6% as Sinopec is rumored to be willing to sell numerous cargoes of LNG. Fresh supply for Europe could help alleviate growing price pressures across the continent, as prices more than tripled for some consumers in 2021. Overall sentiment in the space remains weak, with geopolitical tensions and the prospects of increased global supply weighing on price.

 

Jan 20, 2022 |  Brendan Fagan, Intern  |   DailyFX

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Had a few more good trades with Natural Gas. 

Missed the break out yesterday above 4000 but caught the retest of the 200MA. NG was working within a narrowing pendant formation as you can see in the screenshot. Bought above the support at 4015 and close below the downwards trendline at 4105 for £215 profit. 

Second trade was the breakout from the pendant formation (magenta lines) following the publishing of the NG storage report. Bought at the 15min candle close above the trendline at at 4172 and closed the trade at 4227 for a £275 profit. 

NG - LONG 20220127.jpg

NG - LONG 20220127_2.jpg

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Natural Gas: Next Storage Draws Could Be Price Game Changer In Freezing Market

By Investing.com (Barani Krishnan/Investing.com)CommoditiesJan 27, 2022 
 

As this January shapes into the month when Americans may use the most heating for a winter in seven years, energy traders are grappling with the question: Will the next few natural gas drawdowns from storage by utilities be game changers for the fuel’s price?

Natural Gas Daily
Natural Gas Daily

 

The US Energy Information Administration (EIA) will update at 10:30 AM Eastern Time (15:30 GMT) today closing numbers for last week’s gas storage.

A consensus of analysts tracked by Investing.com project that utilities drew down 216 billion cubic feet (bcf) of gas from storage to burn for heating and power generation during the week ended Jan. 21. 

That would compare with the 137 bcf drawn down during the same week a year ago and a five-year (2017-2021) average withdrawal of 161 bcf.

If the analysts tracked by Investing.com are right with their projections for last week, then total gas in storage is expected to have come down to 2.594 trillion cubic feet—about 1% lower than the five-year average and 10% below the level the same week a year ago.

Last week’s usage would follow the 206 bcf that the EIA said utilities consumed during the previous week to Jan. 14.

The last time more than 200 bcf was drawn down from gas storage was almost a year ago, during the week ended Feb. 12, 2021.

“Next week’s withdrawal is also expected to be above 200 bcf,” Dan Myers, analyst at the Houston-based gas market consultancy Gelber & Associates wrote in a Wednesday email to the firm’s clients seen by Investing.com

The driver behind the outsized draws and depleting storage is, of course, the freezing weather descending across much of the United States now, particularly the East Coast which accounts for the largest gas-fired heating market.

 

Natural Gas Storage
Natural Gas Storage

 

Source: Gelber & Associates

Full article on Investing.com

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hi all,

just positing some interesting TA on Natural Gas again. With weather forecasts suggesting a strong demand NG is on the rise again this week. I picked up some historic resistance/support levels that turned out to be important as the week progressed. (shown in cyan dashed line ~ 4194) It provided resistance during Monday evening before breaking out on Tuesday morning going up by 132 points before retracing down to the cyan line ~ 4194 bouncing off it twice before going up again by over 130 points.

 

I also picked up a trend line that the price is also responding to (shown as magenta). It is dictated by the price increase on Monday/Tuesday morning, and although price went above and below during Tuesday, it picked t up again Tuesday night.

NG - TA 20220216.jpg

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5 minutes ago, ecou said:

hi all,

just positing some interesting TA on Natural Gas again. With weather forecasts suggesting a strong demand NG is on the rise again this week. I picked up some historic resistance/support levels that turned out to be important as the week progressed. (shown in cyan dashed line ~ 4194) It provided resistance during Monday evening before breaking out on Tuesday morning going up by 132 points before retracing down to the cyan line ~ 4194 bouncing off it twice before going up again by over 130 points.

 

I also picked up a trend line that the price is also responding to (shown as magenta). It is dictated by the price increase on Monday/Tuesday morning, and although price went above and below during Tuesday, it picked t up again Tuesday night.

NG - TA 20220216.jpg

Hi @ecou

Thanks for sharing your analysis.

Natural Gas Futures: Extra gains in the pipeline
2/16/2022 | By Pablo Piovano, FXStreet

Considering advanced prints from CME Group for natural gas futures markets, open interest rose for the second consecutive session on Tuesday, this time by around 7.5K contracts. Volume followed suit and went up by almost 30K contracts, partially reversing the previous daily drop.

Natural Gas now targets $5.00 and above
Prices of the natural gas extended the rebound on Tuesday amidst rising open interest and volume, which remains supportive of the continuation of the uptrend in the very near term at least. Against that, the uptrend should initially target the key $5.00 mark per MMBtu for the time being.

Screenshot%202022-02-16%20at%2007.21.13-

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The magenta trendline I drew continues to provide some level of resistance/support and has been a useful tool for confirmation along with the VWAP and 50MA. However I don't think I made the best trade possible with the information to hand as you'll see in the screenshot but I made a profit nonetheless but should have timed my buy in below the trend line perhaps. 

NG - LONG 20220216.jpg

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Hebe Chen | Market Analyst, Australia | Publication date: Thursday 17 February 2022 

Natural gas: mid-term momentum stays positive

Natural gas prices moved higher for the fourth straight day and continued to regain the loss from the slide since early February.

Up to Thursday, the price has pushed through former resistance from the January high and left the 20- and 50-day moving averages (MA) in the rearview mirror. The 100-day MA will be the imminent resistance level to challenge in the next couple of days, which, if broken through successfully, will see the price of natural oil advance towards the recent high at 5230.02 and challenge the November high.

Medium-term momentum is poised to stay positive as two emerging signs: first, the RSI trendline is moving towards overbought territory at around the 60 level; second, the low of each pullback since December has formed an ascending trendline, manifested the market’s appetite for dip-buying.

Natural gas daily chart

Natural%20Gas%20daily.JPGSource: ProRealTime
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