Gas prices in the U.S. continue their downtrend, renewing more and more lows. Quotes are now nearing 2.1, with the September 2020 low of 1.92 being close to the round level of 2. Reaching the aforementioned levels is likely to be a matter of the next few days.
The collapse in gas prices seen in recent months might lead to a subsequent slowdown in production and a new supply-demand balance. But so far, U.S. gas output hasn't dropped that much: from 98.3 Bcf/d in January to 97.4 Bcf/d in February. This is only 2.4% less than an all-time high of 99.8 Bcf/d produced in November 2022.
The news on fuel prices has not been as positive as it could be in Europe. Gas consumption in the EU between August 2022 and January 2023 turned out to be 19% lower than the 5-year average. This means that demand reduction has exceeded the target of 15%. The EU is now going to start the gas replenishment season with storage facilities more than half full. As a result, there will be other price caps during spring and summer.
The requirement for EU countries to reduce gas consumption expires at the end of March. The European Commission is then expected to advise the bloc members on its prolongation, suggesting that gas demand could remain suppressed for a longer period of time.
The "bears'' in the gas market are going to use the levels of 2 and 1.92, marked earlier, as their next targets. The oversold condition on the technical indicators is irrelevant when the fundamental data becomes negative.
The following trading strategy can be suggested:
Sell natural gas at the current price. Take profit 1 - 2. Take profit 2 - 1.92. Stop loss - 2.3.
Traders may also use Trailing stop instead of a fixed Stop loss at their discretion.