Natural gas in the U.S. has been falling for 12 trading sessions in a row. The decline from the last local highs is already about 30%. Quotes are at their lowest level in 10 months. It is linked to the forecast, which predicted warmer weather in the next two weeks. At the same time, a larger-than-expected inventory drawdown has had less impact on the gas price.
U.S. Energy Agency forecasts are positive for gas prices.
The latest forecast by the U.S. Energy Information Administration (EIA) shows that in 2022 the spot price of Henry Hub gas will average $6.48 per million British thermal units (MMBtu), and in 2023 it will be $5.43 per MMBtu. The gas price is expected to jump to $6.17 in the first quarter of the next year, and in the second quarter it is expected to drop to $5. In the third quarter of 2023, a slight increase to $5.18 is expected and in the fourth quarter it is expected to be to $5.35.
Demand for gas can also be supported by China’s positive news. Economic activity is recovering in several cities, where the number of COVID cases has probably already peaked, although many parts of the country are still struggling with fast disease spread. The mobility of the population is still well below the levels reached a few months ago. Subway ridership in Beijing, Chongqing, Chengdu and Wuhan rose by about 40% to 100% in the week to Wednesday. It is a sign that residents of these areas are getting back to work.
According to the technical analysis, natural gas prices are significantly oversold. This is evidenced by both the magnitude of the 30% drop with no pullback and the oversold of the RSI indicator. This indicator is now at the level of the previous gas price lows through 2022. There is a high probability that there will be a technical rebound from this level.
The rebound target, at least to remove oversold, is set at the level of 5.15. There is the first Fibonacci level, if the current decline is taken into account.
Stop-loss is put a little below the current lows near the price of 4.30.
Natural gas is likely to grow:
Take profit – 5,15
Stop-loss – 4,30