Natural Gas Cooling Off Into Heating Season

Now’s primetime if you’re an energy trader. Winter forecasts continue to roll in and cold fronts are sweeping across the CONUS. Naturally, it is also a time to eye both the fundamentals and technicals of Henry Hub Natural Gas. Most novice investors simply analyze the continuous prompt-month of HH NG. Having spent years on an energy trading floor and advising clients on how to handle their energy procurement needs, however, I know that watching one key contract offers the most insight.

Winter demand peaks in January in the natural gas market. So, I prefer to analyze trends in the January contract. The trend is not all that bullish as volatility does its usual thing – rising as winter approaches. I see support in the $3.46 to $3.50 zone – a breakdown below that range could trigger significant downside. I see resistance in the $3.90 to $4.00 range. For now, with price drifting toward the lower end of that area, it could be worth a swing long, but I would not be playing Jan ‘24 NG from the long side right now when looking out to expiration.

Also consider that seasonal trends are not compelling either. If you don’t follow Equity Clock, I suggest you take a look. November and December are dreadful months, on average for the United States Natural Gas Fund ETF (UNG). Hampered by bearish contango at times, the Nov-Dec stretch is the worst two-month performance period in UNG’s 15-year history, with particularly bearish price action from Thanksgiving through the end of the year.