The extreme heat wave in Europe is starting to affect natural gas prices. The main factor restraining the rise in prices is the surplus of gas reserves in Europe and the United States.
According to the latest data, European gas storage facilities have passed the 82% occupancy level. The 5-year average for the current time period is 67%. As of July 16, gas reserves amounted to 94.52 billion cubic meters. This is 21.73 billion more than last year and 18.46 billion cubic meters higher than the 5-year average.
Meanwhile, U.S. gas inventories are also rising. They increased by 1.39 billion cubic meters to 83 billion in the week to July 14.
Such a high level of reserves gives market participants confidence that there will be enough fuel before the upcoming heating season.
In turn, regular temperature records in Italy, Greece, Spain and other Southern European countries contribute to increasing demand for cooling. In Italy, for example, electricity consumption has reached a 6-year high. Most of the energy supply is provided by thermal power stations, operating on gas and coal.
The UK escaped these high temperatures, but gas demand is also rising to the highest levels since May. In general, the European gas market remains extremely sensitive to sharp fluctuations in demand or sudden disruptions in gas supply.
A few weeks ago, the International Energy Agency (IEA) warned about the probability of another surge in natural gas prices this winter. According to Fatih Birol, this will be possible if China's economy strengthens and a harsh winter arrives.
The natural gas price is in the formation of an upward corrective trend on the H4 timeframe. Within this channel, a downtrend has formed, similar to the flag chart pattern. The price has broken through the limits of this figure. This indicates a possible trend change and the beginning of the price movement towards the upward flagpole.
Signal:
The short-term outlook for natural gas suggests buying.
The target is at the level of 2.980.
Part of the profit should be taken near 2.780.
The Stop-loss is set at 2.325.
Bullish trend has a short-term character, so the trade volume should not be more than 2% of your balance.
This content is for informational purposes only and is not intended to be investing advice.
