Alert

Check out the top 4 stocks to watch in October 2022
tastytrade logo
uploaded image

Jun 24, 2021

Natural Gas Forecast: Prices Rise as US Heat Wave Drives Demand Narrative

By:Thomas Westwater

Natural Gas Forecast – Talking Points

·       Natural gas prices on track to rise near 10% so far this June

·       Record-breaking temps in western US is driving energy demand

·       Technical outlook significantly improved with the latest rally

Natural gas prices are nearly 10% higher for June as a record-breaking heatwave scorches the western United States. The unusually high temperatures extend from California out to the Great Plains, covering thousands of miles across cities and rural areas alike. Over a dozen locations saw new records set last week, according to the National Oceanic and Atmospheric Administration’s (NOAA) Alex Lamers, a meteorologist with the agency’s Weather Prediction Center.

The extreme weather has people cranking up their air conditioning units, placing heavy demand on electric grids. In fact, soaring temperatures are placing such enormous demand on the grid that a hydroelectric power plant in California may suspend operations for the first time in over 50 years. State officials estimate the power generator has two to three months left to operate at the current pace, highlighting the strain caused by the heatwave.

The triple-digit temperatures have caused grid operators and elected officials to ask residents to conserve power, with California declaring a state of emergency. Moreover, the western United States is facing severe drought conditions in areas, stressing hydropower generation. That said, other energy sources – including natural gas – are soaking up an outsized chunk of energy demands.

Furthermore, according to the National Weather Service, the harsh temperatures are expected to extend into this weekend. Meteorologists expect temperatures to rise 20 degrees above average into early next week, with the Northwest expected to see some of the highest mercury readings.  Energy demand will more than likely continue to fuel demand-side pressures on natural gas prices.

NOAA 8-14 Day Outlook

Source: cpc.ncep.noaa.gov

 

Natural Gas Technical Breakdown

Natural gas appears to have successfully recaptured a September 2020 trendline, with the latest swing low confirming the level as support. The 20-day Simple Moving Average (SMA) appears to have also offered a degree of confluent support. The heating gas’s technical posture looks primed to provide prices a chance to tackle the 2020 high at 3.396.

However, the recent swing high at 3.369 or the former 2021 high at 3.316 may pose as resistance before testing that area.  That said, the latest rally broke through negative divergences in both the RSI and MACD oscillators, negating possible bearish signals. Alternatively, if prices do drop, the 20- and 50-day SMAs may provide downside support.

Natural Gas Daily Chart

Chart created with TradingView


Written by Thomas Westwater, Analyst for DailyFX.com
To contact Thomas, use the comments section below or
@FxWestwater on Twitter


Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

Related Posts

tastytrade content is provided solely by tastytrade, Inc. (“tastytrade”) and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, transaction or investment strategy is suitable for any person. Trading securities can involve high risk and the loss of any funds invested. tastytrade, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors, and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastytrade is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparison, statistics, or other technical data, if applicable, will be supplied upon request. tastytrade is not a licensed financial advisor, registered investment advisor, or a registered broker-dealer. Options, futures and futures options are not suitable for all investors. Prior to trading securities products, please read the Characteristics and Risks of Standardized Options and the Risk Disclosure for Futures and Options found on tastyworks.com. 

tastytrade is a trademark/servicemark owned by tastytrade.

tastyworks, Inc. ("tastyworks") is a registered broker-dealer and member of FINRA, NFA and SIPC. tastyworks offers self-directed brokerage accounts to its customers. tastyworks does not give financial or trading advice nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of tastyworks’ systems, services or products. tastyworks is a wholly owned subsidiary of tastytrade, Inc (“tastytrade”).

tastyworks, Inc. (“tastyworks”) has entered into a Marketing Agreement with tastytrade (“Marketing Agent”) whereby tastyworks pays compensation to Marketing Agent to recommend tastyworks’ brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastyworks. tastytrade is the parent company of tastyworks. tastyworks and Marketing Agent are separate entities with their own products and services. tastytrade has different privacy policies than tastyworks.

Quiet Foundation, Inc. (“Quiet Foundation”) is a wholly-owned subsidiary of tastytrade The information on quietfoundation.com is intended for U.S. residents only. All investing involves the risk of loss. Past performance is not a guarantee of future results. Quiet Foundation does not make suitability determinations, nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of Quiet Foundation’s systems, services or products.

© copyright 2013 – 2022 tastytrade. All Rights Reserved. Applicable portions of the Terms of use on tastytrade.com apply. Reproduction, adaptation, distribution, public display, exhibition for profit, or storage in any electronic storage media in whole or in part is prohibited under penalty of law, provided that you may download tastytrade’s podcasts as necessary to view for personal use.