On Wednesday, gas prices renewed an 18-month low amid expectations of lower heating demand in late January.
Refinitiv forecasts an increase in gas demand in the U.S., including exports, from the level of 121.4 BCF to 128.7 BCF next week as the cold weather sets in. Wednesday's gas price forecast was lower than Refinitiv's forecast on Tuesday.
The Freeport LNG plant adds additional volatility to gas prices. There are new reports that the plant is about to be restarted coming out almost every day, followed by subsequent denials and analysts’ doubts. Here’s an example of two news pieces that were released one day apart.
Refinitiv data showed that gas from the pipeline system began flowing into Freeport over the past weekend. And while federal regulators haven’t yet received a request to restart the plant, the gas flow may be signalling that Freeport is gradually starting to get back to operation.
A growing number of analysts say they do not expect the Texas Freeport LNG export plant to start operating until February. The plant is pending regulatory approval. When the Freeport plant is back at work, demand for gas in the U.S. will jump, thus leading to higher prices.
So, it’s getting almost impossible to forecast price movements on speculative news like these. In such case, we will take into consideration the technical analysis solely without linking it to the fundamental one.
The natural gas price is still trading within the oblique rectangle, which was drawn in our previous forecast. On Tuesday, its upper limit was tested, and today the price approached its bottom. So, it’s logical to expect a new rebound from this level, with a growth target being closer to the rectangle’s upper line. The current point is the best one for entrance in terms of yield/risk ratio.
The RSI on the hourly chart indicates the divergence. The oscillator is increasing, while the natural gas price is declining. There’s a bullish factor in the short term.
Let’s set a target at the level of $3,500. Stop-loss is placed at exiting below the rectangle near $3,204.
An increase in the natural gas price:
Take profit – 3,500
Stop-loss – 3,204