Natural gas prices in the U.S. are trying to move up again after a collapse in late May. It is important to note that the local lows of the last three months are turning out to be at increasingly higher levels. Soon, this fact is unlikely to provoke the price growth to the May high of 2.8, but at least it will keep gas quotes from going back to the downtrend.
The beginning of summer in the U.S. was accompanied by moderately warm weather, which caused a decrease in electricity generation by 5.2% year-on-year. However, that could change very soon. The Electric Reliability Council of Texas (ERCOT) said that in the second half of June, the state will experience a heat wave. Due to this, record residential and business demand for air conditioning is expected.
Lower gas production could also spur its prices higher. According to Refinitiv, U.S. average gas production reached 102.1 billion cubic feet per day since early June, compared to May production of 102.5 billion. Meanwhile, production has slowed in recent days, dropping below 99 billion cubic feet. Such a low level of U.S. gas production hasn’t been seen since February.
Only reduced demand from LNG plants holds back the prices of fuel. Many of them are currently undergoing maintenance, and gas consumption should increase once repairs are completed. Meantime, the Freeport plant, the second-largest LNG producer in the U.S., is expected to bring its third liquefaction line to full capacity soon. This should ensure a new record in LNG exports and increase gas demand.
The nearest growth target for gas prices is 2.4. This scenario remains relevant until the quotations have settled below the 2.24 level.
We may offer you the following option of trading strategy:
Buy gas in the range of 2.29 – 2.32. Take profit — 2.4. Stop-loss — 2.24.
Also, traders can use Trailing stop instead of fixed Stop-loss at their disposal.