Natural Gas: Window of Opportunity to Hedge Cost of Gas & Electricity May Be About to Close – Part 3 In my November 16th Energy Update, I said Nov 10th, prices returned to the lower Bollinger Band, and the

In my November 16th Energy Update, I said Nov 10th, prices returned to the lower Bollinger Band, and the primary reason was to give large hedgers more time to purchase positions prior to Natural Gas moving higher in December. I said prices would likely move higher from here, but if we retested the recent low it should be considered a buying opportunity.

After reaching the lower Bollinger Band Nov 10th, Natural Gas has consolidated above the recent low, and although it is possible prices could briefly decline one last time towards the lower Bollinger Band, in today’s report I will explain why news released last week increased the risk Natural Gas will rally to a new yearly high in December.

Last week, Germany announced it was suspending certification of a Russian gas pipeline called Nord Stream 2. It was hoped this pipeline would help mitigate the impact of low gas supplies in Europe if we experienced a colder than normal winter. I have included a link below to an article written on Nov 18th “Europe was already facing a winter gas crisis. The risks just got even bigger”, read CNN article

If you read this article, you will understand why the delay in certifying the Nord Stream 2 pipeline increases the risk Natural Gas prices will be much higher this winter both here and abroad. Before this news was announced, I believed based on what I wrote in my Oct 11th, Energy Update, after reaching the fall low, hedgers would likely push the market to new highs in December, and this news increases this probability.

In my Oct 11th, Energy Update, I said In my years of trading commodities, I have always focused on seasonal patterns to help determine my entry points, and there were four years similar to this year when Natural Gas rallied into the fall from lower prices; 2000, 2002, 2005 and 2013. And in each case, Natural Gas pulled back in the fall prior to rallying to a new high in December.

Subsequent to my Oct 11th Energy Update, I explained this year’s rally was due to the present administration’s restrictive energy policies and fear of inflation in the U.S., along with a 10-year low in Europe’s Natural Gas supplies caused by their green energy policies. And if this year’s winter is colder than normal, the news released last week not only increased the probability Natural Gas will rally to a new high in December, but it will also likely be much higher in the 1st quarter of 2022.


Although it is possible prices this week could briefly decline one last time towards the lower Bollinger Band before reversing and moving higher in December, I believe the risk/reward of waiting for lower prices is not wise, and I hope this report  helps you understand the timeliness of hedging your cost of Gas and Electricity near this year’s fall low as protection against the risk of higher energy prices.

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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