Natural Gas: Trading Range Could Stretch Up By $2

In our analysis, we'll take a look at the extended trading range experienced by natural gas futures last week, as growing noise was flowing in about the impact of the Freeport blast. The impact of the blast could result in supply disruption for a extended time to Asia and Europe, particularly as a steep surge in demand continues.

US natural gas prices tumbled after a fire broke out at the Texas export terminal at Freeport, threatening to leave the supply of the fuel stranded in shale basins despite surging overseas demand. NG tested a low at $8.024 and a high at $9.656 before closing the week at $8.850.

Undoubtedly, the duration of the supply outage matters significantly as this could continue to impact power production as hot weather conditions continue from California to Texas with highs in the mid-90s to 110°F, resulting in regionally strong demand.

In addition, growing inflation could add one more leg to the sharp surge during the upcoming weeks as the national average price for regular unleaded gasoline increased to $5.004 a gallon on June 11, up from $4.986 one day previous.

This sudden surge in regular unleaded gasoline could encourage natural gas bulls to start the first trading session of the upcoming week with a gap-up opening.

In the weekly chart, we see NG possibly experiencing an overstretched trading range of about $2, raising the price from $8.061 to $10.062. The final weekly closing of the coming week could remain above $9.767 since the moving averages still indicate an uptrend.

Despite a lot of selling pressure, NG's daily chart on Friday found its closing point well above the 9 DMA, which is currently at $8.440. This could result in a gap-up opening on the first trading session of the upcoming week with bulls turning more aggressive once they find a sustainable move above $9.4.

On the hourly chart, the overall situation looks favorable for natural gas bears as NG closed the week well below the 200 DMA. This may lead to extreme volatility during the first two trading sessions of the upcoming week.

Wednesday could finally define the final direction of the commodity as the overall supply outage situation and duration could finally be clarified.

Disclaimer: The author of this analysis does not have any position in Natural Gas futures. Readers are advised to take any position at their own risk; as Natural Gas is one of the most liquid commodities of the world.