Wednesday, September 4, 2013

Are Potential Storms Setting Up A Nice Short In Natural Gas?

Once again it's weather that is the key driver of natural gas, with both heat and potential storms on the minds of traders.

The latest NOAA 8-14 day forecast is continuing to show a large portion of the US expecting above average temperatures.

While over the last few days there have been a number of tropical weather developments that have the potential to turn into tropical cyclones and cause headaches in the Gulf of Mexico.

I've been keeping a close eye on the Nov13/Jan14 spread and as you can see from the chart we are back at a resistance level.

We also have a nice seasonal window that runs from the 18th of September through to October 10th.

That said I'm still waiting on some more signs of a reversal. It's a little unclear how the tropical weather will develop, even though they are all only low probability events, and I don't want to step up too early.

The weather, whilst being above average, is most probably not going to influence injections into storage to the same extent as a heatwave in the middle of summer.

So for now keep watching the weather, waiting on signs of a turnaround. This trade is likely to be offering some good potential if we're patient.

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