Can Nat Gas Bulls Make A Run For $8 This Shoulder Season?

Monday, April 4: April Fools Day was last week, but would it be foolish to think bulls have a case to make a run for $8? We don’t think it’s out of the realm of possibility US nat gas prices continue higher, especially when considering bulls have bought every dip over the past few months, and really over the past year plus. We have viewed bulls as taking full control last month when they were able to rally prices off of $4.46-4.50 to now currently trading near $5.75. Unless bears were to reclaim $5.50, we continue to give bulls the benefit of the doubt, especially since they bought every dip last week and are at it again early this week. Bulls also rallied prices strongly last spring, despite weather patterns being rather bearish, and could be at it again this spring. We view strong recent buying as being due to a relatively bullish background state with deficits holding between -244-300 Bcf, seasonal buying on the expectation of a hotter than normal US summer, inflation, and due to major geopolitical issues, highlighted by the Russian invasion of Ukraine. What could derail the case for prices going over $6 would be a jump in US production since this would loosen the supply/demand balance. If nat gas prices were to take out $6, we think it’s possible prices rapidly rise towards $8, especially when considering nat gas prices like to extend much higher and lower than many expect. As such, we are watching nat gas prices closely to see if nat gas bulls can push May’22 prices towards $6. If taken out, a squeeze towards $7-8 could result.