- Hurricane-driven rally followed by contract-rollover rollercoaster for natural gas prices
- An increase of 7 more natural gas rigs increased the total rig count to 528
- Storage build-up with increasing weekly injections
- Increasing demand from European and Asian countries
- Capacity outage at nuclear power plants
- Weather could remain mixed
Natural gas surged during September 2021 and tested a seven-year peak at $6.314 on Sept. 28. But a significant pullback from the peak level on the same day increased the skepticism on the strength of this sudden surge. Disbelief continued and natural gas futures closed the last week at $5.547.
Natural gas started this uptrend on Dec. 28, 2020 after testing a low if $2.235 and continued to move upwards to $5.642 on Sept. 15, 2021.
Undoubtedly it was profit-taking that dragged natural gas futures back to $4.473 on Sept. 21, before resuming the current uptrend on Sept. 23. This time, the natural gas futures tested a seven-year peak of $6.314 on Sept. 28; from where a steep slide followed on the same day which is keeping this downward trend intact till last week’s close on Oct. 1.
Since June 1, natural gas bulls have remained in command after a breakout above the psychological resistance of $3. Secondly, daily capacity outages at US nuclear power plants averaged 3.1 gigawatts (GW) during the summer of 2021 (June 1 through Aug. 31), 22% less than the 4.0 GW average in summer 2020. Nuclear capacity outages were lowest in August when they averaged 1.7 GW for the month. US nuclear outages are usually at their lowest during summer and winter because electricity demand is high during these seasons.
Natural gas futures continued to surge with growing support from heatwaves which were followed by hurricane-driven rallies and contract-rollovers on Sept. 26 that fueled this rally to test a new high on Sept. 28. This was followed by a steep slide amid growing weakness due to the restoration of production facilities in the Gulf of Mexico and increasing rig counts.
The weather could remain mixed with warm weather in the East and cooler weather on the West coast. Hurricane Sam and Tropical storms continue to swirl in the Atlantic. But a sudden surge in demand from the European and Asian countries could continue to propel bullish sentiments in futures during the days ahead. I find that the main trading range for futures could remain from $4.931 to $6.147 during the upcoming week.
Disclaimer: The author of this analysis does not have any position in Natural Gas futures. Readers are advised to take any position at their own risk; as Natural Gas is one of the most liquid commodities of the world.