Tuesday’s trading session saw a small increase in natural gas prices as the market continues to oscillate around the 50-day exponential moving average. This signal is followed by a large number of traders worldwide, however the natural gas markets are currently in their own universe. The volatility continues to increase, and it appears that the $8.00 level will at least attempt to provide support. I do feel that this market will eventually become a “fade the rally” market, especially now that it appears that many of the major European countries have saved enough gas to at least attempt to survive the winter.
Despite this, the situation remains extremely fluid, and things are deteriorating. Due to this, I believe extreme caution is required, and the only way I would trade the natural gas markets at this time would be through the options market. Unfortunately, the premium is really large because to the enormous level of volatility, so you must also consider this.
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As a general rule, natural gas is not a retail market because it is so dependent on the weather in the United States and on news about locations such as the Fremont terminal and whether or not repairs are proceeding on schedule. Ultimately, the United States must be able to export LNG internationally so that Europe may accept it. Beyond that, you must also comprehend the European LNG network, as LNG cannot just be shipped; it must be converted back into gas upon arrival, and these facilities in the EU are currently operating at full capacity.
