- The natural gas markets look pretty good, but I would be a bit cautious about the overall directionality and trend of the market for a large list of reasons.
- All things being equal, the market is of course paying close attention to the $2.25 level, which is an area that has been important more than once.
- All things being equal, this is a market that also is likely ready for some type of bounce.
- That doesn’t necessarily mean that I’m a huge buyer of natural gas at this point, just that we very well could see a little bit of a recovery.
Heat in the northeastern US
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I live in the northeastern part of the United States, and I can assure you that the heat is definitely a major driver of natural gas consumption. It will be roughly 95°F where I live in the next few days, which is somewhere around 35°C. This of course has people cranking up the air-conditioners, which of course is driven by electricity. Electricity in the northeastern part of the United States is quite often driven by natural gas.
That being said, it’s generally heating that people are paying attention to when it comes to natural gas, due to the fact that the majority of heating in American homes in that region of the country is driven by natural gas directly. Because of this, this tends to be a situation where the market has a certain cycle to it, as natural gas typically gets a lot more bullish in the colder months. During the summer months, it’s a little bit more of a mixed bag, and therefore I think if you are a longer-term trader, then you might be able to put somebody to work here, but you need to keep your leverage down as natural gas markets can be extraordinarily volatile.
As for myself, I am invested in this market, but I’ve done it through an ETF, so therefore I don’t have to worry about leverage. I’m simply waiting for traders to start pricing in winter temperatures in places like Boston and New York, and then I will collect my profit. This is a trait I do every year and now that we have pulled back the way we have, I probably will add to my position.
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