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Market Balance Model 2

Last update: April 26, 2018, 7:54 EDT
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IMPORTANT MESSAGE: The methodology used to construct this model is believed to be outdated. It is currently being reviewed. Please be aware of the risks.   

Market Balance Model 2 (MBM) is the most sophisticated gravity model. It takes into account all the fundamental factors than have a potential to influence the price of natural gas. Model inputs include: the amount of gas in storage, future weather conditions, historical consumption and production levels as well as external trade dynamics (imports and exports). MBM shows if the market balance is tightening or loosening. The chart shows 48 weeks of historical performance and provides an outlook for 8 weeks into the future. 

The left axis on the graph is inverted. Therefore, when the market balance is tightening, the trend is bullish and model curves (Inclination 1Inclination 2TREND) move towards zero and below (i.e., moving up on the chart). When the market balance is loosening, the trend is bearish and model curves move towards zero and above (i.e., moving down on the chart). The lower the indicators (the higher they are on the graph), the tighter the market balance and the higher should be the price. The higher the indicators (the lower they are on the graph), the looser the market balance and the lower should be the price. The signal is the strongest when all curves are in agreement. When TREND curve is below the inclination curves, then there is a strong bearish development. When TREND curve is above the inclination curves, then there is a strong bullish development. When TREND curve is between the inclination curves, then the signal is not too strong and market dynamic may change rapidly. Remember, that markets are forward-looking, so price action often precedes the fundamental trends. It is also very important to keep in mind the futures curve when making trading decisions.

Updated every weekday by 9 AM Eastern time. New forecast week is added every Friday.

Source: U.S. Energy Information Administration, NOAA National Weather Service / Climate Prediction Center, CME Group, Bluegold Research estimates and calculations

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