Natural gas, commodities, federal reserves, inflation – talking points
- Natural gas futures will exceed $ 5.00 MMBtu as supply concerns increase
- Hurricane Nicholas adds insult to injuries, additional production of shutters
- The US CPI is showing a slowdown in inflation, but energy prices continue to rise
Natural gas prices continued to rise higher on Tuesday as fears of a significant shortage of supply persist. In the Nicholas lands, energy futures prices rose after market participants raised prices in the wake of supply shortages following Hurricane East. Production in the Gulf Coast lagged behind demand in the weeks leading up to the East. Hurricane Nicholas exacerbated these production woes.
Potential floods and strong winds from intensifying Nicholas could shut down production from Texas to Alabama. Due to extreme weather conditions, market participants have the opportunity to add significant premiums to commodity prices, as shown by recent pricing. Higher energy prices further complicate the “temporary” inflation discourse as the Federal Reserve seeks to reassure households about recent price rises. Despite Tuesday’s consumer price index, households and businesses may worry if energy prices continue to rise at current rates.
The potential path of Hurricane Nikolai
Google courtesy, NOAA
In my previous one a piece of natural gas, I discussed that the main outlook positioned the potential for natural gas and the $ 5.00 MMBtu level to be retested and ruptured. At present, natural gas futures are in the “overbought” territory of the Daily Relative Strength Index (RSI), indicating that the price may have come too quickly. Although this does not require a withdrawal, market participants should be wary of a possible return of supply in the near future following the withdrawal of Nicholas. As markets often look to the future, Nicholas and its impact may already be in the price.
Natural gas daily schedule
The chart is created using TradingView
With that in mind, the price drop can be seen in a psychological $ 5.00 re-test. In the event of any extreme weather conditions or unexpected supply disruptions, these futures contracts may be further extended to test the 1,618 Fibonacci extensions for $ 5.69. Although market participants may seek a slight withdrawal in the light of the recent run, traders may wish to maintain a bias based on the baseline forecast. Until supply reaches equilibrium, the price view should remain more expensive.
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– Written Brendan Fagan, trainee
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