Natural gas is now trading at the lowest level since August and is poised to break below the key $3.40 level. It has been a rough road for the fuel, but with so much working against it, things could get worse before they get better.
The main problem is that demand has failed to materialize in any sustained way. Looking at long-term weather forecasts, moderate temperatures will be in place for most of the country through November.
I have been trading this market from the long side, but I now believe it's time to rethink that. If we go to the charts showing what happened last winter, you will see that warm temperatures took a heavy toll on pricing. We were trading down to $3.25 by Dec. 6, the market had dipped to $3.05 by Jan. 2.
If temperature forecasts stay what they are now, I will have no choice but to look to trade natural gas from the short side—or not at all—for the time being.
In fact, that's where I'm at now. I have no position in nat gas and plan to take a few days to evaluate my next move.
But if you do have a position don't miss the Energy Information Administration inventory report, coming out Thursday at 10:30 a.m. That could be a big market-mover.