There aren't enough prerequisites for stable growth in gas prices

13 February 2023 243
There aren't enough prerequisites for stable growth in gas prices

Over the previous week, gas prices in the US were able to grow for the first time since the beginning of December. The weekly price increase was 4.3%. But this is hardly a big consolation for gas buyers, as over the previous two months, its cost has decreased in aggregate by as much as 63% for a total. And so far, any growth in quotes is perceived as a rebound without a solid fundamental basis, based on technical oversold.  

The pessimistic picture in the gas market is largely related to an unusually warm winter in the US and Europe, which led to a decrease in demand for gas for heating and the accumulation of stocks in storage facilities that exceeded expectations. Utility companies have been increasing activity lately due to the cold, but analysts at Gelber & Associates believe that the increase in gas demand may be insignificant unless it is supported by a cold weather forecast for at least a few weeks ahead.

Asian gas quotes are also declining, and the reasons are completely identical to the situations in the US and European markets — reduced demand and high levels of reserves. The recovery of the Chinese economy hasn’t yet been able to significantly change the situation with LNG consumption and prices.

The process of restarting the Freeport LNG export plant is moving very slowly, which was not facilitated by the people of Texas, who recently expressed their dissatisfaction with the work of US regulators in checking the technical condition of the enterprise. They think that it is necessary to slow down the restart of the plant and carry out a more detailed check of all security systems. Now, the resumption of LNG shipment from the plant will highly likely take place no earlier than early March.  

The growth of gas quotes over the previous week helped bring the RSI indicator out of the oversold zone, but this is still not a strong signal for growth on a negative news background. We should expect another price cut soon.

We may offer you the following option of trading strategy: 

Sell gas in a range of 2.5 - 2.6. Take profit – 2.35. Stop-loss – 2,7.

Also, traders can use Trailing stop instead of fixed Stop-loss at their disposal. 

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

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