The price of natural gas futures is rallying since the winter is coming in the northern hemisphere. Apparently the heating season is subject to greater NG consumption.
According to the Commodity Trading Department of Masterforex-V Academy, the December futures of natural gas traded around 3.7 as of November 17th. The January futures traded around 3.8.
Traders expect the price to keep growing in mid-term perspective despite abundant NG inventories. The price will most likely be fluctuating within a bullish sloping channel.
Bullish Factors
It is reported that the natural gas used to heat US households and facilities will appreciated by 13% in the near future. Around 50% of US households use natural gas to heat their homes, as reported by U.S. Energy Information Administration (EIA). Apparently, higher consumption leads to higher prices.
At the same time, the bullish predictions for NG prices make natural gas a less popular commodity to generate electricity.
As far as the seasonality concerns, late fall and winter is the time when people consume more natural gas during the heating season. The picture below shows the near-term weather outlook.
Another bullish factor to consider is the possibility of an export increase. In 2013, the export of natural gas is up from 69.2 to 70.0 70.0 Bcf/d while the predictions for 2014 are around 70.4 Bcf/d.
Bearish Factors
Among the key bearish factors are rather high inventories and fast pace of NG production. As of November 8th, the US NG inventories counted 3,834 Вcf.
At the same time, the production of natural gas is expected to increase by 0,38Вcf/d in December.
Another factor to consider is the weather forecast for the West of the USA, where the winter is expected to be milder.
At the same time, we should keep in mind the EIA's price forecast.
Trading Recommendations
The public portfolio owned by the Commodity Trading Department of Masterforex-V Academy contains sold put options that expire in January and has the 3,2 strike. The options were sold on November 14th. The trade is currently a winner ($100 per option). The trade remains open.
