Gas prices in the U.S. continue to move within a downtrend. Gas has been steadily getting cheaper for a month, which brought the quotations to $2 for the first time since the beginning of May. It’s the level where the fall could stop, but there are still no fundamental signals for a reversal. Given the lows of early 2024, short positions in the gas market still have the potential to increase profits. The next target for the bears could be $1.9.
The gas price extended the decline amid the aftermath of Hurricane Beryl, which hit the Gulf Coast last week. The disaster forced LNG producers to shut down operations, thereby reducing demand for natural gas. At the same time, U.S. inventories are now 19% above the seasonal average, and the restriction on LNG exports will further exacerbate the domestic gas surplus.
The Freeport plant, the second largest U.S. LNG supplier, plans to restart 1 of 3 production lines by the end of this week. The remaining units are in the process of inspection and repair after the hurricane, and the exact restart date is not yet known. The company has started receiving gas at a minimum level of 0.1 billion cubic feet per day, but it’s not enough to eliminate the excess supply of fuel.
Bloomberg analysts consider the passage of Hurricane Beryl a worrying sign for the U.S. LNG industry. The storm significantly complicated the production and supply of liquefied fuel, while Beryl was a hurricane of the lowest category (1 out of 5). Forecasters expect an active hurricane season in the Gulf of Mexico with the peak of bad weather in early September. Until then, LNG plants will be at constant risk of shutdown, limiting demand for gas and putting pressure on its prices.
From a technical point of view, gas prices have good chances for a local rebound. Nevertheless, the main downward trend still seems to be steady, and the oversold condition is clearly not enough to break it.
The following trading strategy can be suggested:
Sell gas at the current price. Take profit — 1.9. Stop loss — 2.15.
This content is for informational purposes only and is not intended to be investing advice.
