Despite a pullback from the highs of late May, gas prices in the U.S. continue to hold most of the gains of the last month and a half. During the correction, quotes held above the level of 2.5 and now moved to consolidation, in anticipation of drivers for a new directional movement. At the same time, both technical and fundamental picture on the gas market continues to improve. Under such conditions, the bulls may once again test the strength of the level of 2.9.
According to Reuters, money managers seem more optimistic about gas prices. They purchased 316 billion cubic feet of gas last week, and the net long position reached its highest since October at 881 billion cubic feet. U.S. gas inventories are still well above seasonal averages. However, the surplus has fallen to 28% from April's level of 40% by the current moment.
Gas surplus is gradually offset by high demand from power plants and growth in LNG exports. According to LSEG, last month U.S. companies shipped 7.6 million tons of liquefied gas to the world market. This corresponds to the March indicator and exceeds the April result by more than 20%. In June, LNG exports may grow even more, considering that the Freeport plant has been operating at full capacity only since May 10.
In turn, gas consumers increase demand amid hot weather. Thus, in May, the consumption of gas in India became the highest for almost 6 years. Reuters analysts expect gas demand in the South Asian country to increase by 10.5% in the current fiscal year. The latest LNG import data already shows purchases rising to the highest since October 2020. The rise in prices to six-month highs has not yet had a negative impact on liquefied gas consumption.
A small correction in gas prices, which took place in the last days of May, helped to relieve technical overbought in the RSI indicator. This opens the way for a new rise in quotes to the level of 2.9.
Consider the following trading strategy:
Buy natural gas at the current price. Take profit – 2.9. Stop loss – 2.55.
This content is for informational purposes only and is not intended to be investing advice.
