Is Present Mild Weather a Long-Term Natural Gas Buying Opportunity?

Energy News: November 13th, 2023 Is Present Mild Weather a Long-Term Natural Gas Buying Opportunity? In our October 30th

Energy News: November 13th, 2023

Is Present Mild Weather a Long-Term Natural Gas Buying Opportunity?

In our October 30th Energy Update we pointed out since 2000 Natural Gas has been above where it was on April 10th, 96% of the time:

Therefore, it was not surprising that on October 30th Natural Gas was 68% higher than where it was Apr 10th, and most importantly Natural Gas was now above the 200-Day moving average.

This long-term moving average is closely followed by traders who consider this moving average a reliable indicator of the long-term trend, and major support on pullbacks. After writing the October 30th Energy Update, last week, NOAA forecasted unusually mild weather would move into most of the United States this week:

Milder than normal weather will decrease demand for Natural Gas and has led to a short-term pullback in Natural Gas:

But as you can see from the above chart, after our April 10th Energy Update, Natural Gas has trended higher, and traders have taken advantage of all short-term pullbacks. 

The market is forward looking; therefore, it pulled back last week prior to the arrival of the mild weather this week. But now that the mild weather has arrived the market being forward looking will likely rally after this latest short-term pullback anticipating the inevitable return of cold weather later this month. 

After reading our Apr 10th  Energy Update those who heeded our warning rates were likely heading higher long-term and secured a fixed rate nailed the lowest rates of the year. But with that being said, please don’t despair that you have missed a major opportunity. From a long-term perspective, this cycle of higher Natural Gas prices is likely still in its early stages with higher prices still ahead:

Since 2000, the 4 times Natural Gas declined to where it was in 2023, the average price was always much higher for at least 36 months.

Therefore, we recommend anyone with an agreement expiring in the next 18 months, take advantage of this latest short-term pullback due to mild weather and reserve energy to be available when their present agreement expires. Our concern is the longer they delay, the more they will likely pay later. 

Not every client’s risk tolerance and hedging strategy are the same, but the above report will help you put into perspective the risk/reward opportunities. I invite you to call one of our energy analysts to help you plan a hedging strategy appropriate for your situation.

Ray Franklin
Energy Professionals
Senior Commodity Analyst

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