Price of natural gas rises due to lower production in the U.S.

U.S. natural gas prices jumped 1% in the last trading session to a one-month high. The increase was driven by expectations of higher demand in the current week and due to production cuts by some producers in response to prices falling to their lowest level in three and a half years. The price increase came despite lower liquefied natural gas (LNG) exports from the U.S. and lack of weather forecasts predicting increased heating demand until mid-March.

In February, natural gas prices collapsed to a three-year low of $1.533 per million British thermal units (MBtu). It was driven by record high production rates, favorable weather conditions and moderate heating demand. These factors have allowed utilities to significantly increase their gas inventories, which is not usually the case this time of year.

As noted by industry experts, current gas inventories in the U.S. are 31% above average for this time of year. According to LSEG, average daily U.S. gas production since the beginning of March has been 100.1 billion cubic feet. That's down from February's average of 104.1 billion cubic feet per day.

Production fell by 6.6 billion cubic feet per day last month to a six-week low of 98.2 billion cubic feet per day. This trend is having a positive impact on natural gas prices.

Natural gas price has broken out of the downtrend on the H4 timeframe. At the same time, there is a clear trend formation on the H2 timeframe. 

The Stochastic Oscillator curve (standard values) has left the oversold zone. The price of natural gas, having pulled back from the support, could resume growth within the correction channel.

Signal:

The short-term outlook for natural gas is to buy.

The target is at the level of 2.125.

Part of the profit should be fixed near the level of 2.005.

The Stop loss could be placed at the level of 1,810.

The bullish trend is of a short-term nature, so it is suggested to limit the trading volume to no more than 2% of your capital.