Natural Gas Prices Gaining Strong Upward Momentum

As the global energy market evolves, natural gas remains a key component, recognized for its adaptability and relatively lower emissions than traditional fossil fuels. This article follows the previous one, which discussed the expectation of a strong surge in natural gas prices in August and September. Natural gas prices have formed a bottom and initiated a strong upward movement. The price is approaching the key level of $2.90 to $3, and a break above this level will trigger the next move higher.

Natural Gas Bullish Price Outlook

The bullish outlook is propelled by inventory levels, geopolitical tensions, and weather-related disruptions in 2024, which influenced the market’s dynamics. The inventory data also pointed toward higher-than-expected demand, contributing to a bullish outlook for prices in the short term. Those catalysts were covered in depth in this earlier analysis.

From a technical perspective, natural gas prices were expected to form a bottom around $1.50 at the baseline support, as shown in the weekly chart below. This baseline support has triggered significant price rallies in the past. The formation of bullish patterns, including the inverted head and shoulders and the rounding bottom, suggests that natural gas is poised for another upward movement. Historical price spikes, such as those seen in 2020 and 2022, provide a roadmap for future gains in 2024 and 2025. These expected price spikes indicate buying opportunities for investors.

Moreover, geopolitical developments and supply disruptions further complicate the supply side of the equation. While these events have temporarily decreased export capacity, they also present opportunities for domestic price increases, especially if demand continues to outstrip supply. Additionally, Sinopec’s performance and fluctuating global demand patterns significantly shape market behavior, providing additional context for investment strategies.

Natural Gas Rebounds at a Key Long-Term Support

The monthly chart below reflects the strong rally in natural gas prices observed in September. This chart highlights the long-term support of around $1.50. It is evident that when prices approach this long-term base support, natural gas prices tend to react higher. This support has proven to be a reliable long-term buying area, consistently triggering major buy signals throughout natural gas price history.

Natural gas prices are set to rise from long-term support levels, and this has proven true as prices have started to increase, as seen in the chart below. The monthly candle for September 2024 is strongly bullish, and prices are attempting to break higher. However, the RSI remains below the mid-level of 50, indicating that a price correction may develop in the short term, offering a potential buying opportunity for traders and investors.

It is found that when prices generate long-term signals, they typically experience significant increases following a few months of consolidation. As such, this recent price action aligns with historical trends, suggesting that the market may continue its upward trajectory in the coming months. While the current rally is promising, traders should be mindful of potential corrections that may arise. If the price corrects lower in the short term, it may offer excellent entry points for investors looking to capitalize on the next phase of natural gas price growth.

The above discussion is further supported by the weekly chart below, which supports a bullish price action. The price projection was expected to be around $2.90 to $3 from the low levels, and this target is about to be reached. This level has been a key area for natural gas prices, and prices must break above it to trigger the next surge. The weekly chart below illustrates the price fluctuations before each significant move. Prices are nearing the end of their consolidation cycle, and a break above $3 may initiate the next upward surge. Moreover, the RSI rises from the mid-level, indicating an upward movement in natural gas prices.

Price Strength at Short-Term Resistance

As per the above discussion, natural gas will likely move higher from these bullish patterns. The daily chart below also shows a bullish price structure. The chart highlights a red trendline where a downward-tilted inverted head and shoulders pattern has formed, with the left and right shoulders at $2.23 and $1.88 and the head around the $1.50 area. Additionally, the head of this pattern is supported by solid and quick reversals at $1.52, $1.64, $1.69, and $1.65. These quick reversals from the long-term base formation around the $1.50 region indicate that prices are forming a long-term bottom, which will likely exert upward pressure on prices.

Interestingly, when prices hit the resistance line (red trendline), the RSI becomes overbought and triggers a price correction. Natural gas prices approached the resistance line again in September, and the RSI is overbought. This overbought condition may find resistance at this trendline, resulting in prices declining in the short term. However, the long-term trend remains strongly upward, and this decline is likely to find support, leading to the next upward surge. The short-term resistance is $2.90 and $3; breaking above this level will open the door for higher prices.

To better understand the short-term price behavior, the short-term chart for natural gas shows a triangle pattern formation in the spot market, with prices rebounding from the support area within this triangle. The rounding bottom support within the triangle suggests that natural gas prices are attempting to move upward. However, prices must break out of the triangle pattern to initiate a solid upward surge.

Final Thoughts

In conclusion, natural gas prices are building strong momentum from long-term support levels, with technical indicators and historical patterns aligning for a potential upward surge. The formation of bullish structures, such as the inverted head and shoulders and the triangle pattern, suggest that natural gas is poised for short- and long-term growth. While short-term corrections may occur, especially near resistance levels, any dips could offer strategic entry points for investors. The immediate resistance for natural gas is between $2.90 and $3; a break above this level will spark a strong surge in the market. The bullish price development from the long-term base of $1.50 also indicates a continuation of the upward trend.