Fundamentals are putting downside pressure on natural gas prices

10 July 2023 146
Fundamentals are putting downside pressure on natural gas prices

Natural gas prices haven't shown a clear movement pattern in recent trading days. The positive news of the past weeks didn’t support prices. Now, demand for gas may be on the decline as the heat wave begins to recede.

 

According to data from the Indian government, fuel demand fell 3.7% in June compared to the previous month. Analysts attribute this to the start of the monsoon season in the country. Sales of gasoline, liquefied natural gas and naphtha declined in June.

According to Viktor Katona, lead crude analyst at Kpler, the drop in demand is due to the monsoon season. It usually lasts for four months starting from June, causing some parts of the country to suffer from severe floods. As the expert says, compared to last month, oil consumption in July will decrease only slightly. Nevertheless, demand growth shouldn’t be expected.

 

The filling level of gas storage facilities in Europe is close to peak, so it may slow down in the near future. This could put pressure on natural gas prices.

To prevent space running out before the start of the heating season, the slowdown will be needed. As of July 4, storage facilities were nearly 79% full, while the 10-year average is estimated to be 60%. If the pace of gas injection into storage facilities in Europe doesn’t slow down, the dynamics of demand in the gas markets could change dramatically as reserves are filled. This, in turn, means additional downward pressure on prices.

 

According to the technical analysis, natural gas prices remain in a broad uptrend. The news background suggests a price decline within this range. The downside target will be to reach the support level of 2.48. The 0.5 Fibonacci level of the entire growth wave is located there. At the end of April it was the key level for the trend reversal.

A Stop-loss should be placed at the growth to 0.236 Fibonacci, which corresponds to the price of 2.72. Reaching this level will signal the renewal of the last trading days’ highs and a possible trend reversal.

 

Decrease in the price of natural gas:

Take profit — 2.48

Stop-loss — 2.72

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

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