Natural Gas Futures make explosive move – Charles Schwab

Natural gas prices have experienced a tremendous rally over a relatively short time span. Looking at the continuous contact for Henry Hub Natural Gas, the contract traded at a 52-week low on June 26 of $1.517 while on 18 August prices breached a high of $2.465 on an intraday basis, a rally of nearly 62%. Lighter storage injections and a heat wave in the Western part of the US is supporting prices, per Charles Schwab.

Key quotes

“Bullish traders have been bolstered by supply reports from the EIA indicating a decline is storage injections.  Better than expected demand expectations around the globe and a potential for warmer weather and the tropical storm and hurricane season are factors playing into the bullish theme.”

“Declines in inventory injections can signal a rise in demand or a fall in production, or perhaps both, either way a bullish indication for prices. Traders will want to monitor these weekly reports to see if the trend continues to develop.”

“California is experiencing rolling blackouts and Natural Gas is called into use to supplement wind energy as it alone is unable to meet current demand, resulting in supply a draw-down of natural gas stores in the western regions of the US. Although broiling heat is expected in the Western part of the country, predictive trends in temperature for the eastern half of the US are expected to moderate over the coming weeks. Natural gas traders will also want to keep an eye out for developments of potential tropical storms and hurricanes over the coming months.”

“Looking at the Henry Hub Natural Gas October 2020 (NGv20) we see that prices are trading at 52-week highs. Intermediate support may be encountered at the $2.470 and a second level of support in the $2.355 area.  Traders may encounter resistance near the intraday high on the 18th of August at $2.598.  Currently, the 14-day RSI 70 is showing a high momentum reading of 72.”