Traders look for seasonality patterns when considering natural gas futures prices. While there are other factors to consider, changes in the weather and just as importantly, expected changes in the weather contribute to natural gas futures price activity by driving demand higher. Natural gas demand is highly seasonal, with demand typically peaking during extreme temperatures in summer and winter. In Canada and the U.S., demand peaks in the winter, falls in the spring on temperate weather, picks up again amid summer temperatures and cooling demand, and is again lowered by moderate fall weather.
Supply, demand and storage are the three major factors used in analyzing natural gas seasonality. Gas production is relatively stable but may experience unexpected disruptions such as unscheduled pipeline maintenance, explosions or extreme weather. As a long term trend, the production of natural gas in the United States has been increasing steadily with technology advancements.
Storage will then be impacted by the interplay between supply and demand, typically dipping through the winter months. Inventory announcements are then a good weekly barometer of the impact of seasonality.
Using average prices on the front month natural gas futures contracts over the past ten years, traders can see the higher price points through January and a climb once we cool off again in the late fall. This is a trend to be aware of when forming trading strategies on natural gas.
For 2025, we are seeing price levels that are higher than the norm, particularly compared to the last two years that had milder winters. We have seen a colder than expected winter, contributing to even higher and more volatile natural gas prices to begin the year. On top of that, as natural gas has broken through its expected trading range, there is a possible short squeeze in play as traders with short positions look to cover their positions by buying and potentially driving prices even higher.
Elevated price levels and higher volatility indicate increased opportunity for high conviction traders.
If you hold leveraged and inverse ETFs for more than one day, your return could vary considerably from the ETF's daily target return. The negative effect of compounding on returns is more pronounced when combined with leverage and daily rebalancing in volatile markets.
Leveraged ETFs are a convenience tool for traders, providing a solution that doesn’t require direct margin from security holders. Trading on the exchange just like a stock means that traders have an easy-to-use solution.
At LongPoint, we saw the gap in the Canadian marketplace for competition in exposures with higher volatility than equity markets and launched the Savvy Geared ETFs that provide either two times long or two times inverse exposure to natural gas and crude oil futures.
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