US natural gas futures plunged more than 10% on Tuesday, reversing Monday’s rise, which saw the contract surge more than 10% at one point to break above $8 per million UK thermal units and the to reach its highest level since September 2008.
Henry Hub prices fell 10.2% on Tuesday to trade at $7.02. The May contract is now about 13% below Monday’s high.
Natural gas prices have soared since Russia invaded Ukraine at the end of February. The contract has had five straight weeks of gains and is up nearly 90% for the year.
Matt Maley, chief market strategist at Miller Tabak, said Monday natural gas is technically ripe for a pullback. Pointing to the Relative Strength Index, a momentum indicator, Maley said the commodity has been the second most overbought since 2003.
“Its RSI chart is now at levels that have historically been followed by short-term pullbacks,” he noted on Thursday. “We’re still bullish on natural gas (and natural gas-related stocks), so we’re not saying that investors should take profits right here. Instead we [are] All I’m saying is that investors should avoid chasing these assets in the short term.”
Prices rose on Monday on forecasts of colder spring temperatures, a fuel shift from coal to natural gas and US shipments of record LNG to Europe.