Natural Gas News: Any Hope For Bulls?

| December 15, 2015 | 0 Comments

nat gasNatural Gas News: Where’s The Bottom?

No doubt about it, the situation in natural gas has officially gone from bad to downright ridiculous.

The commodity broke to new decade lows below $1.90 mmBtu yesterday thanks to weeks of freakishly warm weather in Eastern US.  Fact is, temperatures across the Eastern seaboard have been well above average since early November.

Here’s a chart…

natural gas prices over last 6 months

As you can see, natural gas is still stuck in a steep bear market thanks to resilient US production, abundant inventories, and warm temperatures.

Speaking of inventories…

Last Thursday’s EIA natural gas report revealed there are 3,880 billion cubic feet (bcf) in storage for the week ending December 4th.  While that number in 76 bcf lower than the previous week, it’s 15.3% above year ago levels and 6.5% higher than the five year average.

Here’s the EIA’s storage chart…

eia121515

Notice how current inventories (blue line) are well above the 5-year average range (shaded area).

Without question, there are abundant quantities of natural gas sitting in US storage caverns right now.

Is there any hope for natural gas bulls right now?

Unfortunately, no…

Even though the price of the commodity is trading just shy of the 2012 low at $1.90 mmBtu, it’s unlikely we see any dramatic upturn soon.

Here’s why…

NOAA’s 8-14 day outlook

Judging by the NOAA’s 8-14 day outlook, Old Man Winter is still nowhere in sight.  The Eastern US will likely remain stuck in this dominant warm weather pattern through Christmas.

What’s causing this abnormal Eastern US weather?

Most meteorologists are pointing the finger at El Niño.  The disruptive Pacific Ocean phenomenon tends to bring mild temperatures to much of the US.  According to Accuweather.com, the warmth recently broke a 142-year old record in Lexington, Kentucky. 

Here’s the key for trading natural gas… 

While the outlook is undeniably bearish right now, I wouldn’t be short this commodity.  The first hint of cold Eastern US temperatures and we could see a substantial short covering rally.

On the other hand, if temperatures remain warm in key usage regions, we may see the commodity weaken even further.  Given the remarkably abundant inventories, it’s not out of the question for natural gas to seek out the 1995 low near $1.25 mmBtu.

Due to the weather uncertainty, the best course of action is to remain patiently on the sideline in natural gas. 

Until Next Time,

Justin Bennett

BIO:  Justin Bennett is the head commodity research analyst at Commoditytradingresearch.com.  With over a decade of real world trading experience, he finds ways for you to consistently profit from movements in commodities and the companies producing them.  Sign up for our free reports and commodity newsletter at https://commoditytradingresearch.com/free-sign-up.

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Category: Energy, Natural Gas

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.

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