US natural gas prices attempted to consolidate above 1.9 once again over the past month. Though, this level remained under control of the bears, who did not allow the prices to reach the local high at 2. A reversal in the trend direction may quickly lead the price to the 1.7 level, where the previous growth wave started. The buyers should hardly expect more than short-term upward impulses.
Some recovery in the gas market was due to higher supplies to the Freeport facility. Daily gas consumption at this plant rose from 0.9 to 1.3 billion cubic feet. However, the return to full capacity will not take place until May. In addition, other LNG plants are also under maintenance. Venture Global LNG in particular reduced gas demand from 1.4 to 0.9 billion cubic feet per day, offsetting the increase in consumption from Freeport.
According to LSEG, abundant gas stocks and mild weather occasionally lead to negative prices in gas-producing states. So, some producers in Texas pay extra to consumers in order to get rid of the gas storage surplus. Although the seasonal fuel oversupply has declined from 41% to 37%, it remains significant. At the same time, burning extra gas is prevented by ever-increasing fines for methane emissions.
New LNG export projects could improve the demand situation, but they are still more than half a year away from launching. The US Energy Information Administration (EIA) does not expect the new plants to be in operation until late 2024 or early 2025. As a result, US LNG shipments abroad will only grow by 2% this year, which is clearly not enough to eliminate the surplus.
As long as gas quotes do not consolidate above 2, the market situation remains under the sellers' control. They will focus on bringing the price back to 1.7.
Consider the following trading strategy:
Sell gas at the current price. Take profit – 1.7. Stop loss – 2.
This content is for informational purposes only and is not intended to be investing advice.
