The natural gas rate in the U.S. continues to pull back down from last week's high of 2.86. Today, its quotations test the support at 2.57. If it fails to hold, sellers may immediately send the price to the next important level of 2.5. Technical factors now don’t give unambiguous signals, so we have to focus primarily on the news background.
The main uncertainty factor in the gas market is the situation in Australia. Today is the last round of negotiations between Chevron and trade union alliances of two of its enterprises before the planned strike. If no agreement is reached, the Gorgon and Wheatstone LNG plants will start a shutdown from tomorrow and a full strike for two weeks from September 14.
Initially, this situation sharply increased volatility in the gas markets and made the traders fear prolonged outages and supply disruptions. However, the gas quotations have returned to the initial positions now. The high volume of gas reserves in the U.S., Europe and Asia has allayed most investors' concerns about the probable supply shortage.
Many LNG producers want to delay fuel supplies until mid or even late fall, seeing the prices return to average summer levels. Thus, gas with delivery in November is now traded at European exchanges at more than 30% higher compared to October contracts. The meteorologists' forecast, predicting moderately warm weather until mid-October, also influences this. So, the postponement of the cargo arrival date for several weeks ahead may bring substantial additional profit to the U.S. LNG suppliers.
It can be said that gas consumers in the world's major markets are no longer afraid of a sharp decrease in supply. Therefore, the gas demand is at risk of remaining low until the heating season begins. This situation may stimulate a decline in U.S. gas quotations to 2.5.
The following trading strategy might be suggested:
Sell natural gas at the current price. Take profit — 2.5. Stop-loss — 2.65.
Also, traders can use Trailing stop instead of fixed Stop-loss at their disposal.
This content is for informational purposes only and is not intended to be investing advice.
