U.S. gas prices move to April lows

Gas prices in the U.S., as it was indicated in the previous forecast, continue to decline and are getting closer to April lows. Maybe a new low for the last 3 years will be avoided this time, but the possibility for another test of level 2 seems very high. The fundamental picture on the gas market remains extremely pessimistic.

During the past week, gas inventories in U.S. reserves rose by an additional 54 billion cubic feet. A much larger increase by 86 billion cubic feet in reserves was expected, but even such relatively favorable statistics could not prevent another decline in gas prices. The reason lies in the volume of gas in U.S. reserves.

Natural gas reserves reached 2.063 trillion cubic feet, which is more than one-third above last year's level and 20% higher than the five-year average. It can be concluded that utility companies now have no reason to rush in filling storage facilities, so they can easily reduce the level of gas inflow without concern about a possible shortage.

Analysts from Citigroup confirm the negative forecast for gas prices, warning traders to stay out of the market or to sell gas contracts at any attempt of significant growth. The high level of gas production, which finds no comparable demand either in heating or air-conditioning, plays a significant role here. Citigroup is predicting an average natural gas quote for the second quarter at $2.2, which means a drop of more than 20% compared to the average price for the first quarter of 2023.

The fundamental weakness of the gas market is amplified by the presence of a short-term downtrend on the daily chart. Despite the signs of oversold on the Stochastic indicator, the potential to reach level 2 still remains. If it succeeds, it will open the way to the April low around 1.95.

The following trading strategy option can be suggested:

Sell gas in the 2.07-2.1 range. Take profit – 2. Stop loss – 2,15.

Also, traders may use Trailing stop instead of a fixed Stop loss at their convenience.