Is Natural Gas Forming a Floor? (July 2023)
After the dramatic decline since August 2022, the market might be entering a transition phase in which the trend goes from down to a period of relative stability.
This analysis reflects market conditions and information available at the time of publication (July 2023). It is provided for educational and historical context.
Over the course of approximately three years, natural gas has exhibited exceptionally high levels of volatility. Since April 2023, however, NATGAS prices have embarked on a phase of stability. Could this be the commencement of a solid base?
How We Got Here
- June 2020: The shutdown measures to control the pandemic caused a severe economic contraction worldwide. As a result, natural gas prices fell to near $1.5 in June 2020.
- From July 2020 to August 2022: NATGAS experienced a remarkable uptrend, which gained even more momentum following the Russian assault on Ukraine in February 2022. In August 2022, the price surged to an unprecedented peak, surpassing $10.
- From September 2022 to March 2023: The price displays a relentless collapse for over six months. The strong downward trend persists until a stabilization phase around the $2 mark begins in April 2023.
- Since April 2023: Natural gas prices stall. Then, despite showing signs of a potential shift in favor of buyers, the reversal remains uncertain.
Is NATGAS Forging an Extended Base?
Although NATGAS has been consistently printing higher highs and higher lows since April 2023, the upward movement has been relatively moderate until now. In fact, the recent price action can be characterized as undetermined. It can also be viewed as a combination of a range-bound and a moderate uptrend scenario.
Is Buying Natural Gas a Wise Decision?
The following perspective reflects expectations based on information and policy signals available at the time of writing.
Typically, a situation like this presages the formation of a prolonged base. If this scenario is confirmed, the longer the base, the more robust the scaffolding on which an uptrend can be built.
At what point might a potential rally begin? Considering that an upcoming recession may loom this year or next, making sensible predictions becomes challenging. We must not forget that during periods of economic recession, it is common for commodities to experience downward pressure. Typically, the energy and metal sectors are the most negatively impacted during such times.
