Gas prices in the U.S. fail to break the current negative trend. Over the last month, gas has already become 50% cheaper, falling to its lowest level since June 2021. Friday was a renewal of the low point of the last year and a half, now it is marked at the level of 3.373. Factors affecting the U.S. gas market suggest an even greater drop in prices.
Weather conditions remain favorable across most of the United States and Europe. Exceeding current temperatures above historical averages is suppressing gas demand. The most recent statistics showed that the U.S. recorded a net inflow of 11 billion cubic feet of gas into storages, the first time in the history of observations such a thing has happened in January. Demand for heating in the U.S. is now 25% lower than normal, and until there is a cold snap, it's hard to expect a significant change in the situation.
Despite the decrease in demand, natural gas production from the U.S. shale deposits continues to increase. It is expected that producers will set a production record this month, which will be more than 101 billion cubic feet per day. Gas market analysts see further supply growth even if prices fall.
"The average U.S. gas oversupply is expected to be more than 5.0 billion cubic feet per day in 2023, which justifies the downward trend in prices," said Ryan Smith, senior director at East Daley Capital.
There has been no positive news regarding the restart of the Freeport plant. At least 2 LNG tankers refused to wait for loading near Freeport last week after the sources informed about the company extending the seven-month downtime of the plant until February or later.
One of the targets for reduction at 3.4 has already been achieved, but gas prices have not yet been able to hold at these levels. In the coming days one more attempt to decrease lower than 3.4 and further movement to 3.2 may be seen.
The following trading strategy option can be suggested:
Sell gas at the current price. Take profit 1 – 3.4. Take profit 2 – 3.2. Stop loss – 3.8.
Also, traders may use Trailing stop instead of a fixed Stop loss at their convenience.
This content is for informational purposes only and is not intended to be investing advice.