Disappointing September Pullback? 8/23/2020

NG at the daily.

NG usually has a pullback in September due to cooler weather, but not quite freezing. There are several supports below. 2.24 and 2.08 will be kind of hard to break since they are the 400 and 300 DMAs. The lowest price that I see this going is 1.97. It's less likely, but Natty has a tendency to do the improbable.

September's pullback may prove to be disappointing. A wave of gas companies filed for bankruptcy back in June which caused the short-term bearish pattern during the summer. Utility companies were expecting a prolonged shut down.

Here's the kicker. It's about about supply and demand.

Gasoline only comprises about 1% of natural gas' usage. The biggest usage has been heat, A/C, and the industrial sector. NY and CA are not industrial states. The Rust Belt and the Midwest are where most of the US' industrial sector is located. Most of the those regions are not shut down.

After a series of gas companies filed for bankruptcies and cut production, that means supply decreases dramatically. Even though the US is not back to 100%, the drop in demand is not as big as the drop in suppliers.

Think about it.

The need for heat and A/C will not go away completely. Eventually, that demand increases over time. If there are fewer suppliers, what happens to price? Furthermore, what are the chances that utility companies have to rethink their projected demands now that more states are opening? September might be a disappointing pullback due to the fact that demand may increase, but the number of suppliers may not. The recent hurricanes did not help with increasing the supply as well.

NG mainly has two paths. Either it pulls back to one of the supports and the launches or it breaks the 2.49 resistance. Either way, the end game is that NG may go higher than what bears want.

Remember, every bull and bear market cycle ends eventually. It was just time for NG's bear market to end.