Natural Gas Update - April 24, 2025

April 24, 2025

Natural gas spot futures have today slid to their worst value since mid-November as weak seasonal weather demand continues to weigh on prices --evidenced by the larger than expected build in gas storage seen this week.

Additionally, concerns over tariffs and a trade war have hurt NG lately, as they have other energy contracts. Some have even pointed out of late that the AI demand pickup that was foreseen may be less than anticipated as news surfaces of Amazon and Microsoft  reducing their data center leasing talks.

Yet, the technical picture provided by the attached weekly chart shows that rallies have ensued from early to mid-April in NG spot futures in each of the past 5 years. They last at least 6-8 weeks, when looking at the weakest rally year, which was the Covid year of 2020. The DC chart attached shows a very oversold condition that we believe should make those who are carrying short positions reevaluate that stance.

We believe that demand will pick up from here in general as the calendar turns to May and the potential exists for some early summer heat --with our focus for such being on the large demand state of Texas.

Also worth watching are the production figures for both gas and oil in the U.S. Much has been made of U.S. producers needing a price for WTI of $65 in order to break even. If such oil production is dialed back, then gas production will also fall due to the associated gas that comes with oil production. Has NG production topped out at near 108 BCF/d? Lower production should lend support to the notion of a rally in gas prices.

Also, from a technical standpoint, much of the speculative length that was built up in the early part of the year--has been sold off. The CFTC report for the period ended Tuesday April14, showed money managers net long only 5,061 contracts in options/futures on the CME.

A technical analyst we respect targeted 2.83/2.85 for spot futures several days ago. The same analyst says to us that NG is in his "monthly danger zone"--whereby  "new shorts in this area have an 83% risk.", he added. His monthly view coincides with our comment above of rallies seen at this time of year in the past 5 years. Another respected technical analyst has cited a need to rise above $3.334 to make those short positions reconsider their bearish stance.

We are hearing of interest from clients who are adding length in NG in the winter portion of the NG curve. Additionally, we are hearing of lower risk customers looking at using spreads further out along the curve to position themselves long in NG. Are call spread options and or futures spread positions the best way to situation oneself for a potential rally? versus a straight futures long contract position.

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Disclaimer

This article and its contents are provided for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any commodity, futures contract, option contract, or other transaction. Although any statements of fact have been obtained from and are based on sources that the Firm believes to be reliable, we do not guarantee their accuracy, and any such information may be incomplete or condensed.

Commodity trading involves risks, and you should fully understand those risks prior to trading. Liquidity Energy LLC and its affiliates assume no liability for the use of any information contained herein. Neither the information nor any opinion expressed shall be construed as an offer to buy or sell any futures or options on futures contracts. Information contained herein was obtained from sources believed to be reliable, but is not guaranteed as to its accuracy. Any opinions expressed herein are subject to change without notice, are that of the individual, and not necessarily the opinion of Liquidity Energy LLC