FxWirePro: Fading winter changes natural gas outlook in medium term

We at FxWirePro recommended going long in natural gas at $2.6 per MMBtu with targets around $3.1, $3.7, $4.3 and $5.2 per MMBtu based on the supply/demand fundamentals. While natural gas has reached targets around $3.1 and $3.7 per MMBtu, we suspect that it might not reach the other two targets, at least in the near term. Giving out the call, we warned while the fundamentals are in place for the price of natural gas to rise, weak winters in the previous two years have left the inventories at record high levels and a colder winter is very much required this year, in order to make the price rally.

While the winter was frostier than expected in December, the hope of a prolonged one is fading with temperatures rising all across the United States in January. Despite the fundamentals being in place, seasonality plays a crucial role in natural gas price.

Trade idea:

We recommend closing out the long positions, which are still in the money at the current price of $3.14 and at rallies. In addition to that, add short positions with an initial target of $2.7 per MMBtu.