Natural gas prices in the U.S. have not yet been able to reverse the downward trend. Expectations that the strong rebound in the end of February and the beginning of March would signal a new uptrend did not happen. As a result, gas prices are moving toward 2 dollars per million British thermal units (BTUs) again. Yesterday the low from September 2020 was updated - quotes crossed down to the 2.09 level.
The reasons for another wave of decline in gas prices in the U.S. were the increase in production and forecasted warmer weather. Representatives of EBW Analytics also noted that prices are under pressure from an oversupply of raw materials in reserves. Due to warming weather, the demand for gas in the U.S. will decrease.
The decline in gas quotes comes despite an increase in the volume of gas flowing into LNG export facilities. In March, they reached a new record level due to the ongoing restart of the Freeport LNG plant in Texas, which has been shut down since June 2022. Gas supplies to Freeport were 1.6 billion cubic feet per day on Tuesday, but increased to 1.8 billion on Wednesday.
According to energy traders, this signals the start of the third liquefaction line at Freeport. The company announced that the facility will gradually reach full capacity, processing up to 2.1 billion cubic feet of gas per day.
It turns out that even the current record volumes of LNG exports from the U.S. cannot significantly increase domestic gas prices. Moreover, many new export projects face rejection or at least delay in financing due to banking sector problems. This worsens the perspectives for the future growth of gas demand in the U.S.
With a confirmed breakdown of the level of 2.1, the downside target will move to 2. The RSI indicator is away from the oversold zone and does not prevent the continuation of the downtrend.
The following trading strategy option can be suggested:
Sell gas at the current price. Take profit – 2. Stop loss – 2.2.
Also, traders may use Trailing stop instead of a fixed Stop loss at their convenience.
This content is for informational purposes only and is not intended to be investing advice.