Henry Hub Natural Gas (symbol: NG) is trading above the $4 level going into the 2013-14 winter season. We’ve witnessed natural gas futures trade a historic high of $15.65/MMBtu in Dec05, down to $1.902/MMBtu in Apr12. The Apr12 low likely represents the conclusion of the 6.5 year consolidation. Note the moderation in volatility over the same period.
In recent years, fundamental attitudes have shifted to a perspective of supply comfort on the back of the successful deployment of fracking technology within shale formations. The fundamentals are reminiscent of the ‘natural gas bubble’ years of the 1990’s. Psychologically, the stage is set for another bull market.
A substantial band of resistance exists in the $6.11-8.21 range. Expect prices this winter to test the lower band of that resistance range, specifically the $6.11 level. Above the $8.21 level, there is very little resistance, but that test is likely one or two winters ahead of us.
Murphy & Co’s Natural Gas model is currently flat, holding no positions. To learn more about Murphy & Co’s position models, visit http://murphycofutures.com/position-models/.