Spring Shoulder Has Natural Gas Consolidating Near Long-Term Support at $2.50.

Natural Gas Consolidating Above Long-Term Support at $2.50 https://youtu.be/lkwPW4Gc1FM In my March 15th Energy Update, I said milder than expected

Natural Gas Consolidating Above Long-Term Support at $2.50

In my March 15th Energy Update, I said milder than expected weather led to Natural Gas pulling back from recent highs, and although over the last month we experienced mild weather during the spring shoulder period, which takes place between winter heating and summer cooling seasons, today’s pricing continues to mirror the historical long-term patterns of 2001, 2012, & 2016:

Natural Gas market news

It is not surprising Natural Gas did not rally when demand was low in the spring shoulder period, but it is important to note prices are consolidating above long-term support near $2.50 per MMBtu, and is forming a pattern similar to 2001, 2012 & 2016 when early in their bull markets they formed patterns of higher highs and lows, and the average price was always higher for at least three years:

natural gas market graph

The Energy Information Administration (EIA) predicts exports of Liquefied Natural Gas (LNG) will increase in 2021 and demand will certainly increase this summer; therefore, it is not surprising the EIA expects Natural Gas prices will be higher the second half of 2021 and into 2022.

The good news is the price of Natural Gas in the forward market is still below the EIA’s forecasted rates, and given the empirical evidence contained in today’s charts, I believe it is in your best interest to  secure fixed Natural Gas and Electricity rates at this time. Although it is possible milder than normal weather could lead to Natural Gas going a little lower, I believe, the downside reward potential of lower prices short-term is minimal versus the upside risk of higher prices long-term.

Not every client’s risk tolerance and hedging strategy is 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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