Natural gas prices in the US continue to consolidate after a sharp pullback from 10-month highs in early November. The bulls held the level of 3, but gas prices have not yet managed to return to steady growth. Above the level of 3.25, the pressure from sellers becomes too strong. Fundamental factors also don’t support gas prices at the moment.
The heating season has started in North America, Europe and North Asian countries. However, there is no noticeable increase in gas prices, they remain at October levels. Despite the cold weather, the consumption of gas hasn’t yet surpassed its injection into storage facilities. Reservoirs in Europe are more than 99% full. According to the International Energy Agency (IEA) estimates, the volume of gas in European storage facilities will be enough for 65 days in case of normal winter temperatures and 84 days in case of a repeat of last year's abnormal heatwave.
Traders are also keeping a close eye on whether household and business demand for gas will start to pick up after last year's record drop in consumption. According to Jonty Shepard, BP's vice president of LNG trading and production, it's still unclear whether the drop in demand was a one-off or will become permanent. At the same time, Cristian Signoretto, Shepard's colleague at Eni, doesn’t expect big problems in the winter, even if volatility in the gas market increases.
The relatively calm situation is ensured by growing gas supplies from leading producers. In October Russia exported a record volume of LNG, the supply of gas from American companies is also increasing. At the same time, disruptions in gas supplies from Israel are gradually coming to naught. In such a situation, it is difficult for the prices to find reasons to rise.
While the gas prices can't get a foothold above the level of 3.25, the bears will try to test the important mark of 3. It could be hard to break it, but the chances of touching this level are still high.
The following trading strategy can be suggested:
Sell gas not higher than the level of 3.25. Take profit — 3. Stop loss — 3.4.
This content is for informational purposes only and is not intended to be investing advice.
