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Natural Gas Trading: Strong Bullish Bias Vs. Weak Bearish Signals

June 19, 2018  

Natural gas has been in an uptrend for the past five months now. Indeed, we have been recommending to buy the dips ever since the fuel cost index set a seasonal low on February 15 (see this article). In this article, we would like to explain why we have favored (and continue to favor) long positions over short ones.

Over the past five months, there has not been a single strong reason to be bearish on natural gas. Of course, there have been opportunities to profit from short-term bearish corrections, but the overall trend since February has been decidedly bullish. So, why did it make sense to focus more on long positions? Here are the top four reasons.

REASON 1: Trends In The Electric Power Sector

During the injection seasons, the Electric Power sector accounts for about 50% of natural gas demand. The price of natural gas for electricity generation (relative to coal) has been very low, which has spurred natural gas consumption in the Electric Power sector in general and stimulated healthy levels of coal-to-gas switching in particular.

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