LNG export growth will support a recovery in natural gas prices

31 March 2023 238
LNG export growth will support a recovery in natural gas prices

Natural gas makes another attempt to bounce up. The price remains above the $2 level. There are many drivers for the price rebound now, but all of them have been yet ignored. In recent months, investors' attention has been focused on the restart of the Freeport LNG export plant in Texas. Yesterday, the plant reached full capacity, and now it accounts for 20% of U.S. LNG exports. A major part of the produced LNG is exported to Europe, where the energy crisis is still unfolding.

Given these circumstances, Europe is looking for a way to suspend LNG supplies from Russia. So, strong demand for the American

LNG is expected, and this will put pressure on the domestic supply of gas in the U.S. This could lead to an increase in gas prices in the States.

The EU officials began to look for a legal possibility to stop the supply of LNG from Russia without applying sanctions. They require unanimous approval from all 27 EU member states.

Lithuanian Deputy Energy Minister Albinas Zananavicius said the proposal would allow avoiding the use of LNG infrastructure to increase imports from Russia. This system was created to facilitate the exchange of Russian gas for the gas of other exporters.

China's economic recovery accelerated in March. Manufacturing, service and construction indicators remain strong. Such data raise the outlook for economic growth in this year, as well as indicate an increase in demand for energy.

As it was said by Zhiwei Zhang, chief economist of Pinpoint Asset Managemen, strong PMI values indicate a strong economic recovery in China. It has been progressing according to the plan.

The statistics has a positive impact on prices of energy resources. The demand for them will grow up as expected. It means that LNG supplies to China might increase, and Europe will have to buy more gas from the U.S.

According to the technical analysis, there is an attempt of a reversal, and earlier any similar upward exits were quickly extinguished by the sellers. However, the nearby strong support of $2 can give confidence to investors regarding the further growth.

The recent local highs at about $2.150 can be chosen as the upside target. A stop-loss should be placed when the price moves below the reversal formation in the form of a bowl. This is the level of $2.075.

An increase in the price of natural gas:

Take profit — 2.150

Stop-loss —2.075

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

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