Investment Manager’s Analysis: Natural Gas Futures Bearish Amid Energy Emergency Declaration
Amid concerns over the impact of the national energy emergency declaration by US President Donald Trump, natural gas futures are facing a surge in bearish sentiment. The recent inventory announcements have indicated a bearish trend ahead, with lesser withdrawals than expected.
Despite a brief upward move following Monday’s exhaustive movement, natural gas futures failed to close above the immediate resistance at $4. This failure has raised concerns over the negative effects of the energy policy shift, which focuses on increasing production despite lower demand.
Looking ahead, it is predicted that heating demand for natural gas may decrease starting from February 2025. The new energy policy is expected to encourage more production by providing additional permits, potentially leading to a higher tariff regime to generate fresh demand.
However, this strategy may prove impractical as a significant decrease in demand could result in increased costs for maintaining a sudden surge in oil and gas rigs. This reliance on potential demand from higher tariffs may not be sustainable in the long run.
Technical Analysis:
– Daily Chart: Natural gas futures are experiencing selling pressure below the $4 resistance level, with a steep fall expected based on weekly inventory announcements. A breakdown could lead to a test of the 50-day moving average at $3.448.
– 4 Hr. Chart: Bearish momentum is building with two bearish candles and a potential ‘bearish crossover’ by the 20-day moving average below the 50-day moving average. The next support level is at the 100-day moving average at $3.808.
Traders are advised to sell any further upward movement above $4 with a stop loss at $4.208, considering changing weather reports that may indicate milder conditions in the coming weeks. Volatility is expected to increase, so caution is advised when trading natural gas futures.
Disclaimer: Readers should trade natural gas futures at their own risk based on this analysis, which is for informational purposes only.
By following these insights and technical levels, traders can make more informed decisions in the volatile natural gas futures market, potentially improving their financial outcomes.