Natural Gas May Emerge as an Attractive Trade in Coming Weeks


Credit: Glen Dillon / CC BY 3.0

It is predicted that natural gas may emerge as an attractive trade in coming weeks. Although energy investments receive a guarded reception from investors, it is speculated that natural gas and its producers will see strength in trade in the coming weeks.

Generally, natural gas witnesses seasonal strength during the “shoulder” months of spring and fall (May–June and September–October). Over the past 25 years, natural gas prices have the highest possibility of optimistic change in March, April, September and October. More importantly, in the past five years, gas prices have consistently increased every April, the only month to display such a consistent cycle.

The seasonal weakness experience this winter will in all good probability bring in a positive seasonal trade. The speculative net short position of around 200,000 contracts in natural gas futures is also a prospective driver of a short-covering rally. A more primary source of help could come from U.S. inventories if they start exhausting. Inventories are climbing at a rapid pace and are expected to peak at April, which signals a low for prices, following which they revert back to their long-term average.

The rising concerns about oil inventory storage could also prompt to switch investors towards natural gas.

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