Natural gas looks cheap, with its ratio to oil near a 20-year low.
A level we haven’t seen since the early shale expansion era.
But cheap doesn’t mean bottomed.
Right now, supply remains abundant in the U.S., with production and storage still elevated. That oversupply continues to weigh on price.
And that’s the key point:
Markets don’t bottom on value alone.
They bottom when the economics force change.
At some point, prices get too low for producers to justify output.
When that happens, production slows, supply tightens and that’s when real bottoms begin to form.
Until then, the process can take time.
What Would Change the Picture
If prices continue lower without a meaningful slowdown in production, the bottoming process likely extends.
But if we begin to see:
- Stabilization in price
- Reduced downside momentum
- Early signs of supply tightening
That’s when conditions shift.
Also watch the broader energy complex.
If oil remains firm while natural gas stays weak, that divergence itself becomes a signal suggesting different demand and supply dynamics across energy markets.
Those relationships matter.
We are not buying cheap.
We are looking for a tradeable bottom:
- Price stabilizes
- Forms a higher low
- Reclaims short-term moving averages
- And gives you defined risk
Because:
➡ The bottom comes when producers feel the pain
➡ But the trade comes when price confirms the turn
Bottom Line
Natural gas is undervalued but still searching for a floor.
Heads up:
We’ll be taking a short vacation and will return with more great insights on May 10th. Until then, trade and be well.
Twitter: @marketminute
The author may have a position in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author and do not represent the views or opinions of any other person or entity.
