Fundamental and technical indicators drive a rebound in gas prices

25 January 2023 248
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U.S. gas futures fell 6% on Tuesday amid uncertainty on when Freeport's LNG plant will resume operations, as well as predictions about milder weather and lower heating demand over the next two weeks. Although Freeport announced that it is ready to restart, analysts believe it will take time for the facility to come out of downtime and begin drawing substantial volumes of gas from the pipeline system. 

Freeport's relaunch is one of the key drivers for natural gas growth in the U.S. But despite some positive news, gas prices continue to decline. Not even breaking headlines about potentially higher LNG demand in Asia provides relief.

Severe weather hit North Asia. The average temperature in Northern China has dropped to an all-time low, and Japan has already been preparing for snow storms.

This weather is expected to prevail in the region until the end of January. It could boost heating demand from major energy importers. At this point, the effect is likely to be reduced as plants in China are closed due to the Lunar New Year holidays, and Japan can rely on accumulated LNG stocks.

 

The U.S. PMI data for January showed stronger than expected growth. A strong economy in the U.S. implies that the Fed is going to bring inflation back to the target level, thereby pushing rates higher in the near term. In fact, the ECB is quite resolute about the rate. 

Unlike oil, the price of gas is slightly affected by macroeconomic data. 

 

Based on the technical analysis, natural gas prices have been trading in a flat. Now the price is at the lower limit of the rectangle and at the round level of $3. That is why one should expect new attempts to rebound. The next target of this move will be the near-term natural gas breakout at the level of $3.050. A stop loss can be placed just below the minimum price levels around $2.974. Both technical and fundamental indicators are now pointing to natural gas price reversal attempts in the U.S.

 

Natural gas is likely to rise in price:

Take profit - 3,050

Stop-loss - 2,974

This content is for informational purposes only and is not intended to be investing advice.

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