Quotes for natural gas in the U.S. continue to move within the downward trend. The breakthrough of the level 2 has not been confirmed yet, but it looks more like a question of time, rather than a principal possibility itself. The fundamental situation on the U.S. gas market risks to get even worse with the end of the heating season, and from the technical analysis point of view, there are no preconditions for a significant rise in prices.
Demand for gas has dropped significantly due to warm weather this winter in most of the U.S. and Europe. There were hopes for an increase in Chinese imports of blue fuel, but they have not yet been realized. In the first two months of 2023, natural gas demand in China was 63.6 billion cubic meters. The data showed an increase in demand by only 0.1% compared to the same period last year.
New U.S. natural gas production records imposed on weakened demand. The collapse in prices in recent months has not yet led to a significant slowdown in gas production. This is due to the significant part of gas is a coproduct of oil production, and the production of black gold in the U.S. amid the new OPEC+ restrictions may be accelerated additionally.
Fitch Solutions analysts significantly reduced the forecast for gas prices in 2023. The reasons for the revision include weak domestic demand for gas in the U.S. due to warm weather and large reserves, as well as concerns about the economic downturn. The U.S. domestic market is well supplied by high levels of shale gas production. The rescheduling of the Freeport LNG export plant, which began in late February instead of January, also played a significant role.
The way to the September 2020 low just above 1.92 will open for gas prices following a confirmed breakout of level 2.
The following trading strategy option can be suggested:
Sell gas at the current price. Take profit – 1.93. Stop loss – 2.2.
Also, traders may use Trailing stop instead of a fixed Stop loss at their convenience.