This week’s move shows that commodity price volatility may continue in the first two weeks of 2023.
The plunge from $7.108 over the last three weeks of December 2022 pushed natural gas futures into oversold territory. However, Wednesday’s close after hitting critical support confirms the bullish presence below $4.104.
This level has historically provided strong support since the last weeks of August and December 2021 and the last week of January 2022.
On the one hand, the European gas price cap, which will start in February 2023, could keep natural gas prices in check, but even so, the natural gas price cap is yet to be proven. These measures could normalize natural gas prices in the first half of 2023.
On the other hand, changing weather patterns, shifts in supply and demand, and geopolitical equations could test the effectiveness of this price cap in the coming weeks.
Europe will continue to import liquefied natural gas to rebuild gas inventories once this winter is over, which could push natural gas prices higher in the second quarter of 2023.
On the weekly chart, a sustained move above $4.451 could fuel volatility, especially after Thursday’s stock announcement.
An analysis of natural gas movements since November 2018 reveals a defining zone for natural gas futures between $3.517 and $4.564.
A breakout above or below this range would provide a clear long-term trend for natural gas futures.
No one knows what’s next for the world’s most uncertain commodity. Now, despite the announcement of warmer weather, the cold weather conditions prevalent in most parts of the United States have cast doubt on support.
Undoubtedly, a gap up or gap down should be confirmed by a sustainable move of natural gas futures below or above a certain price over the next week.
Finally, we conclude that natural gas futures may remain bullish in 2023 as prices are still above the 200 DMA on the weekly chart despite the recent price drop from the 2022 peak. attached.
Disclaimer: The authors of this analysis do not have any holdings in natural gas futures. Readers are advised to take any position at their own risk. Natural gas is one of the world’s most liquid commodities.