May 24 2024 Market Update

Another wild ride today. 

At 7am, NYMEX July contract sold off from $2.92 US/mm to $2.83 by 8:32am.  The selling continued during the day and July was trading at $2.78 as of 3pm.  

Seems like only two days ago that the only direction was up.  Well, it actually was only two days ago that everyone felt that way.  Now it feels like the bottom is falling out.  For the first time in a while, I read today about an increase in US natural gas production which is not surprising considering the  big rise in prices over the month.

I think now is a good time to reflect on how this price action can affect your thinking.  This month has been a steady relentless climb up and if you needed to buy Natural Gas, you might have been sweating.  The spike up before the EIA storage release might have made you feel some panic.

Remember that this is what natural gas does.  This is a very volatile market and it kills the shorts on the way up and then it kills the longs on the way down.  The nickname is the ‘widow maker’ on the NYMEX trading floor for a reason.

The better plan is to have a have an actual plan which allows for the spikes up and the spikes down.  Accept the volatility and don’t try to ‘trade’ it; just have a conservative mindset that takes advantage of what the market offers.  Remember that your real price is the weighted average purchases over the year. 

In terms of chart reading, if you noticed a big jump up this morning, remember that June is expiring next week so some charting services have started using July data.  The price didn’t go up overnight but rather the change in data for the front month.  I mention that because your plan should account for that.  If you didn’t know about the prompt month roll, you might have had a scare.

Keep Calm and Follow your Plan. 

Don’t forget that Monday is a holiday in the US and if the futures trade, volumes will be very light.

Have a great weekend [WFG]

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