Natural gas has been rising for several days from its 2-year lows. The price has gained about 30% over this time. After this trend, a corrective pullback might be expected. Especially if other commodities continue their downward trend. Commodities are highly likely to continue the decrease, as global central banks vote to keep interest rates high for longer.
The rise in gas over the past days was driven by reduced production and increased demand in the U.S.
According to Refinitiv, U.S. gas production declined from 98.3 to 97.5 billion cubic feet per day in February, as the fall in gas prices forced some energy companies to reduce the number of drilling rigs in use this year. Meteorologists forecast the weather in the U.S. to remain mostly colder than normal through March 14. However, even in case of colder weather, Refinitiv projects U.S. gas demand to decline to 120.8 billion cubic feet per day next week.
Iraq has signed several deals with foreign companies to increase crude oil and natural gas production. Iraq is significantly dependent on neighboring Iran for gas consumption, therefore, the rise in gas production might be especially important. The government in Baghdad has made deals with one Emirati and two Chinese companies, aiming to stimulate the rise in natural gas production by 800 million cubic meters per day.
Increased gas production will create additional supply in the gas market.
According to the technical analysis, the global downtrend has been broken. However, after the 30% gas increase, a corrective movement is expected, which might even take place right now. The consolidation level has been broken down on the hourly timeframe.
The downside target might be a 200-hour moving average, which is now rising rapidly following the quotes. In addition, it is worth outlining the support level, which was formed in early February, as well as the low of an uptrend. Based on these levels, the downside target is to be set at around $2.61. Stop-loss is set at $2.73 when the local highs will be updated.
Natural gas prices are likely to decline:
Take profit – 2.61
Stop-loss – 2.73
This content is for informational purposes only and is not intended to be investing advice.
