Yesterday U.S. gas prices hit their lowest level since mid-September, falling to 2.75. The onset of winter and increased gas consumption for heating are almost completely ignored by the market participants. At this rate, a return to 2.5 could take place as early as the first week of December. Neither technical nor fundamental factors are supporting gas prices now.
As reported by the International Energy Agency (IEA), gas consumption in developed countries keeps declining. In Europe, gas demand after last year's drop of 15% in the first 9 months of 2023 fell by another 9%. According to the agency's officials, such dynamics is caused by the transition of more and more houses to heating by electricity, as well as the growth of energy efficiency. Last winter's warm weather also played an important role, allowing to reduce fuel consumption and maintain a record volume of gas reserves.
The Guardian informs that the U.S. gas demand is also expected to drop, although not as much as in European countries. The American government plans to reduce gas consumption by 1% per year over the next three years. About $370 billion has already been allocated to finance energy efficiency measures.
The situation on the gas market could be slightly improved by the Australian news. A tanker that was supposed to receive an LNG shipment and head to China got stuck during loading at the export terminal. However, the Chinese side prefers to wait for the situation’s resolution and is in no hurry to look for alternative options. Demand in China remains weak, and Cnooc is even looking for ways to resell the January LNG shipments to other countries.
As long as gas prices have not returned above the level of 3, there is still a good chance to update the fall's low near the level of 2.5. At least 2.75 is definitely within the bears' reach.
Consider the following trading strategy:
Sell gas not above the level of 3. Take profit – 2.75. Stop loss – 3.1.
Traders may also use a Trailing stop instead of a fixed Stop loss at their discretion