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U.S. natural gas futures plunged more than 10% Tuesday, reversing Monday’s surge which saw the contract rally more than 10% at one point to break above $8 per million British thermal units and hit the highest since September 2008.
Henry Hub prices declined 10.2% Tuesday to trade at $7.02. The May contract is now down roughly 13% from Monday’s high.
Natural gas has been on a tear higher since Russia’s invasion of Ukraine. The contract is coming off five straight weeks of gains and is still up nearly 90% for the year.
Matt Maley, chief market strategist at Miller Tabak, said Monday that natural gas looked ripe for a pullback from a technical perspective. Pointing to the relative strength index, which is a momentum indicator, Maley said natural gas was the second most overbought going back to 2003.
“Its RSI chart is now up to levels that have been followed by short-term pullbacks in the past,” he noted Thursday. “We are still bullish on natural gas (and the nat gas related stocks), so we’re not saying that investors should take profits right here. Instead, we [are] merely saying that investors should avoid chasing these assets over the near-term.”
Prices surged Monday on forecasts for colder spring temperatures, fuel switching from coal to natural gas, as well as the U.S. sending record amounts of LNG to Europe.