Natural gas futures, while on an uptrend voyage since Dec. 31 after testing a low on Dec. 30, at $3.543, found enough support from the tilting weather from warm to cold during the first week of 2022. The last week witnessed extreme cold weather hovering over most of the United States that kept the national demand for natural gas on the higher side.
Natural gas futures started this week with a gap-up opening well above 5% gain that boosted the confidence of the natural gas bulls to remain active since Jan. 10. Though some profit-booking was after that, the announcement of weekly withdrawal of mere -31 Bcf on Jan. 6 natural gas bulls continued to command with possibilities of shifting weather outlook.
Let’s have a look at the weekly inventory levels since Sept. 16. Weekly injections continued from Sept. 16 to Nov. 18 in 2021. The first weekly withdrawal was visible on Nov. 24. Since then, the weekly withdrawals have shown their impact on natural gas price movements.
In a daily chart, the natural gas futures had started to test peaks in 2021 before hitting a top at $6.526 on Oct. 6 in 2021. Undoubtedly, the bears tighten their grip over the changing sentiments due to growing noise over the possible warm winters in 2021.
Natural gas futures started to slide after testing a high at $5.559 on Nov. 26 and hit a low at $3.627 on Dec. 6, 2021. But, the natural gas futures started to form a base here after this fall. Once again, the natural gas futures resumed this uptrend on the last day of 2021 from $3.581.
Undoubtedly, the natural gas futures have shown a steep surge within a short span of mere nine trading sessions and tested a high at $4.876 on Jan. 12, 2022. The current weather outlook seems to favor the natural gas bulls but, the inventory level looks to be an important factor for the further directional move of the natural gas futures.
I find that a three-digit weekly withdrawal could add more fuel to the current uptrend in natural gas prices that could encourage natural gas bulls to test a seasonal peak in 2022.
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 in the world.