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Natural Gas's Crash to 25-Year Lows. A Meltdown in the Making -- Long BEFORE the Coronavirus

by Nico Isaac
Updated: June 26, 2020

I'm Nico Isaac and THIS is Chart of the Day

 

Natural Gas's Crash to 25-Year Lows. A Meltdown in the Making -- Long BEFORE the Coronavirus

This chart of natural gas illustrates how this commodity used for heat turned cold as ice. From its peak in mid-November 2018, nat gas prices endured a prolonged, relentless rout to the lowest level in 25 years.

Natural Gas - Continuous - 1 week

Today, bears on nat gas see No bottom in sight and wouldn't be surprised if prices entered negative territory before year's end.

What "explains" nat gas's nosedive?

Well, this June 23 news source: cited a massive oversupply beginning in 2019, a milder-than expected winter, and continuing into 2020 with the pandemic-related manufacturing and business stoppages. From the article:

"No major commodity had a worse 2019 than natural gas …

this year has been more of the same with the price of the volatile energy commodity falling to the lowest level in 25 years in March as it faced the prospect of a coronavirus-related steep drop-off in usage."

It's true that as 2020 began, nat gas traders could not have anticipated a warmer winter OR the worst global pandemic sine the 1918 Spanish flu.

But does that mean the market's 69 percent decline was also unforeseeable? That depends. See, in late 2018, natural gas was very much a HOT commodity, standing near a four-year high.

At the time, bulls had their eye on forecasts for a colder winter AND a 15-year low in stockpiles.

So, mainstream analysts expected an early 2019 comeback for natural gas, NOT a "torrid year" of record losses that actually occurred.

But there was an alternative view. The December 27, 2018 Energy Pro Service analysis for natural gas posted a chart similar to this one: It showed a 'Bearish Key Reversal' and outlined a long-term bearish path ahead.

"Volatility is running high and a top is in place ...

The longer-term outlook is for substantially lower lows."

Natural Gas - Continuation - Weekly Range

A few days later, the January 4,2019 Energy Pro Service underscored the bearish forecast:

"2019 should be marked by a lengthy sell-off in terms of both magnitude and duration.... Rallies should prove corrective and set the stage for further decline."

Even though this forecast published more than a YEAR before the novel coronavirus became a global pandemic, prices fell hard -- as forecast. Yet, there were corrective moves, such as this one in late October-early November.

Yet our analysis saw this for what it was: On November 8th we showed subscribers these wave one and wave two labels, meaning the next leg would be a wave three down. Our comment was,

"The current rally fits nicely ... as the final leg of a corrective advance."

From there, nat gas has indeed continued lower, thru June 25th of this year.

Energy markets around the world are experiencing unprecedented volatility. Yet Elliott Wave analysis is at its best when markets are volatile. For more on high-confidence set-ups amidst the wild near-, and long-term swings, see below for more on Energy Pro Service.

A Market Like Natural Gas Crashes 69 Percent?

That is indeed what has happened in natural gas. You just saw it for yourself. You also saw that Energy Pro Service subscribers were ready for the trend, when it was an opportunity.

Now see our latest daily and intraday energy analysis: it can be on your screen in moments, via the fast steps below.

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Markets covered: NYMEX: crude oil, natgas, unleaded, heating oil; ICE Brent; energy ETFs (XLE, etc.)

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