After Consolidating Above Spring Shoulder Low, Natural Gas Rallies to Higher High
As Expected, After Consolidating Above Spring Shoulder Low, Natural Gas Rallies to Higher High! https://youtu.be/rFl8dwk6cO0 In my June 7th Energy
As Expected, After Consolidating Above Spring Shoulder Low, Natural Gas Rallies to Higher High! https://youtu.be/rFl8dwk6cO0 In my June 7th Energy
In my June 7th Energy update, I said during the spring low Natural Gas prices consolidated above long-term support near $2.50 per MMBtu before moving higher, and in the chart below, I showed prices were now consolidating above its spring shoulder low!
In my last report, I said when consolidation patterns form early in long-term trends more often than not, they are continuation patterns, and the trend would continue in the direction it came from. Therefore, since Natural Gas was consolidating above long-term support near $2.50 per MMBtu, and forming a pattern similar to 2001, 2012 & 2016 when prices were higher for at least 3 years, it increased the probability Natural Gas would move higher from present price levels.
And as expected, since my last report, Natural Gas rallied above its previous higher high of $3.34 per MMBtu!
The question is with prices moving to a new higher high is it too late to lock in prices? If you followed my reports this year, you understand it is not too late, in fact it is more important than ever to lock in rates longer-term.
As I explained in my Feb 15th Energy Update, If you only looked at Natural Gas’s one-year chart, you may feel you missed the opportunity to secure a low rate. But it was important to understand over the last twenty years the price of Natural Gas was only this low three times, 2001, 2012 and 2016, and it always occurred early in bull markets, which started with similar patterns of higher highs and lows, and the average price was always higher for at least three years!
As you can see in this 20-year chart of Natural Gas, the recent rally to a new higher high above $3.34 confirms we are likely in the early stages of a long-term bull market and the average price of Natural Gas will remain high several more years.
And as I explained in previous reports, the good news is Natural Gas is presently experiencing a market phenomenon called “Backwardation”. Backwardation occurs when nearby contracts sell at higher prices than contracts further out, and Hedgers can lock in rates well below where they are presently, and more importantly based on the above 20-year chart, below the average long-term price.
Not every client’s risk tolerance and hedging strategy is the same, but the above report will help you put into perspective the risk/reward opportunities. I invite you to call one of our energy analysts to help you plan a hedging strategy appropriate for your situation.
Ray Franklin
Energy Professionals
Senior Commodity Analyst
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