Natural gas drifted lower again on Tuesday as mild US weather kept air-conditioning demand from thinning out supply. FXEmpire analyst Christopher Lewis flags the $2.50 and $2.75 levels as reference points and says he expects to sell short-term rallies in the weeks ahead.
Natural gas drifted a little lower in early Tuesday trading as what FXEmpire's Christopher Lewis called the general malaise in the market continued. Without super-hot weather across the United States, air-conditioning demand isn't picking up enough to wear down supply, and heating is a non-issue this time of year. The market tends to move quietly through the summer outside of heat waves, so the drift lower is no surprise to the analyst.
Support levels in focus
How much further the market can fall is, in Lewis's words, an open-ended question. Still, he points to price memory for reference: the $2.50 region proved a bridge too far for sellers back in late April, marking one area to watch, with the $2.75 level offering another. Those two zones frame the near-term range as demand stays soft.
Traders looking to understand the mechanics can review how to trade natural gas before positioning around such levels.
What could push the market higher
To the upside, Lewis argues it would take some external pressure. He cites a possible heat wave in the US or further damage to natural gas infrastructure in Qatar — which could stoke fears that Europe would have to import liquefied natural gas from the US — as the kind of catalysts that might move prices. For now, none of those are in play.
The market is currently trading the August contract, which covers the hottest month of the year, before attention rolls to September and, eventually, the winter months. Lewis notes that cooler Northeast weather is still some distance off, and that this time of year it's difficult to get bullish, especially through the futures market. He said he suspects he will be selling short-term rallies that show signs of exhaustion over the next several weeks, while conceding it remains a tough market for finding significant moves.
Source: FXEmpire
Trading involves risk.
Risk Disclaimer
