According to our latest forecast, natural gas has reached its growth targets. Now a corrective wave may emerge within the sideways range. New bearish price drivers have appeared over the last couple of days.
Gas prices in Europe continue to decline, and it puts pressure on their cost in the U.S.
Europe has rushed to increase liquefied natural gas (LNG) supplies to ease the energy crisis. Now, plans to create more terminals for the fuel may have gone too far.
According to the Institute for Energy Economics and Financial Analysis, Europe's LNG supply will grow by 50% over the next seven years. Meanwhile, demand for liquid fuels won’t increase and may even fall. The EU risks having up to 250 billion cubic meters of idle capacity. This is more than half of Europe's demand in this sector in 2021.
Natural gas production will increase in the first month of summer, and this is a negative factor for the cost of raw materials.
The U.S. Energy Information Administration (EIA) states oil production in the seven largest shale basins will hit a record in June.
As for gas, EIA forecasts the total production to increase in the major shale fields by nearly 0.3 billion cubic feet per day and hit a record of 97.2 in June. This figure will surpass the current record monthly high of 97 billion cubic feet per day expected in May.
According to technical analysis, the price of natural gas is at the upper end of a sideways range now. Therefore, it is better to open short positions.
A level of $2.25 will be the target of reduction. The reaching of this price may create a pattern indicating a further decline. Also, the area around this price corresponds to the support in the last trading months. We will place a stop-loss near growing to $2.40.
The downside target will be the level of $2.25. If the fall to this price may form a pattern, which will talk about a further decline. Also, the area around this price corresponds to the support in the last trading months. We will put a stop-loss at growth to $2.40. Reaching this price will mean an upward breakthrough of the candlestick from May 15. We suppose that it is the determinant for the further dynamics of gas prices.
Decrease in natural gas:
Take profit — 2.25
Stop-loss — 2.40
This content is for informational purposes only and is not intended to be investing advice.
