Natural gas prices in the U.S. are still struggling to determine the main trend direction. After a corrective pullback from the August highs, the price is consolidating in a flat trend, waiting for strong drivers of growth or decline. The news background of the last few days seems to be in favor of another price downward momentum to the area of 2.58.
The risk of a sharp drop in LNG supplies from Australia has declined. Woodside has managed to reach an agreement with the labor union at its North West Shelf plant to avert a strike. At the same time, employees of Chevron plants announced their willingness to strike on September 7 if an agreement on improved wage conditions is not reached by August 31. Even so, the potential LNG production decline will be halved compared to earlier expectations.
Meanwhile, the U.S. natural gas market is gradually approaching the low demand season. The need for air conditioning will drop with the arrival of fall weather, while heating systems will not be activated until mid-October at best. According to Refinitiv's forecast, natural gas consumption in the U.S. will fall from 104.1 to 102.8 billion cubic feet per day next week.
The current hurricane season may worsen the situation with gas demand. Thus, Tropical Storm Idalia will hit the coast of Florida as early as today. According to analysts' estimates, more than 1 million households and businesses will be de-energized due to the hurricane. Consequently, electricity demand will decrease until repairs are made. And this, in turn, will have a negative impact on gas consumption in the electric power industry.
The RSI indicator on the daily chart has turned downward, increasing the probability of the downward price movement. However, the oversold zone is still rather far, and technically the sell signal looks reliable. The nearest target of the bears in the U.S. gas market might be the 2.58 level.
The following trading strategy may be offered:
Sell gas for the current price. Take profit – 2.58. Stop loss – 2.73.
Traders may also use the Trailing stop instead of the fixed Stop loss at their discretion.
This content is for informational purposes only and is not intended to be investing advice.
