Downward trend in natural gas remains dominant

07 February 2023 220
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Volatility in natural gas began to decline and a flat movement was formed on the hourly timeframe. Preconditions for the reversal of gas prices, which have been declining for several months, are being created.

However, for now, the gas is moving in a flat, so a new wave of decline to the lower boundary of the rectangle is possible.

 

The fundamental background remains favorable. Earlier, the same news did not give any impulse to increase the price of gas.

Weather conditions in the U.S. will be worse than previously predicted. In particular, a cold snap is expected from February 18 to 19, which will increase the demand for natural gas in the short term.

Another driver for higher prices is the market's growing confidence that Freeport's LNG plant will restart operations in the coming months. At the moment, Freeport is awaiting approval from U.S. regulators to begin shipping LNG. 

 

According to Shell CEO Wael Savan, company's natural gas business will continue to expand after record profits in 2022.

As Sawan states, there is no indication that the tight conditions in the energy market, which helped the company to make huge profits last year, will weaken. 

Production capacity will be growing, which could put pressure on gas. However, as Sawan points out, the energy crisis is not over yet and a reversal of the downward trend in prices can happen at any moment.

 

According to the Energy Information Administration (EIA), U.S. gas reserves were at 2.583 trillion cubic feet at the end of last week. This figure is 9.4% more than was recorded last year.

High gas reserves continue to put pressure on the price.

 

Natural gas trades in a rectangle on the hourly timeframe. At the moment on the hour marker a reversal movement to the lower boundary is forming again. In that case, the downside target would be at $2.345 level. Stop-loss can be set at the exit upwards from the rectangle and at the first resistance levels around $2.520.

 

Natural gas price reduction:

Take profit – 2,345

Stop-loss – 2,520

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

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