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How to Play A Potential Bounce In Natural Gas

Gas

Over the last year or so, probably the most spectacular move in any energy-related market has been the collapse of natural gas (NG). The price of front-end futures in the commodity peaked in August last year at just a shade over $10 before turning tail and dropping to a low of just below $1.95 a month or so ago. A big move like that requires a perfect storm, of course, not just one factor. An unusually mild winter in most of the US reduced demand for gas used for heating and electricity generation, for example, and the expected shortage as Russian gas was supposedly taken off the market never really materialized, but the biggest reason for the shift in sentiment is the most basic, and as old as the hills…the relationship between supply, demand, and price.

Price increases dampened demand for natty, just as production ramped up. Depending on where you get your news, that increase in output may surprise some people. I mean, aren’t fossil fuels in general supposed to be under siege from the Biden administration? Well, yes, but so far, the attacks have been verbal and rhetorical rather than practical, and market forces have done their thing regardless. When gas hit $10, it encouraged big output increases, such that 2022 was a record year for US natural gas output and storage became a problem as demand started to falter.

There are, however, signs that that is changing…

There is always a time lag in these things and there are seasonal variations, but over…





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