Factors Affecting Natural Gas This Week

Weather

Traders are still waiting for the cold weather to start. Mild temperatures in the Midwest and on the East Coast are keeping a lid on demand as well as prices. Even the cold snap which hit the Eastern U.S. a little more than a week ago could not trigger a rise in prices. Since the ice and snow caused power outages, many traders believe this was the reason for the drop in demand and the rise in prices.

Supply and Demand

Increased production continues to drive up supply, pressuring prices. As long as this trend continues, shorts will continue to press the market lower or at least stop any rallies. The one indicator to watch for a possible sign of a bottom is the number of rigs in production. This figure remains high. Unless there is a dramatic shift or shutdown, this fundamental should remain a bearish factor.

Oversold Conditions

With the downside apparently limited, short-trader gains have also been limited. This makes the market ripe for a short-covering rally. It will not indicate a change in trend, however, and is likely to set up an opportunity for bearish traders to re-short the market.