US natural gas prices were not long below the level of 2. Within a week and a half, gas prices rebounded from the 3-month low by more than 20% and are getting closer to the 2.3 level. This is where the growth momentum in late July stopped, therefore it is crucial for the bulls to take over this level. The improved fundamentals in the global gas market may assist them in that.
While last week's surge in gas prices was mainly observed in Europe, now Asian gas buyers have also picked up the pace. Temperatures in Japan, South Korea and most parts of China are still above seasonal averages. As a result, gas consumption remains at a higher level, and local LNG importers must maintain a LNG price premium over that of Europe to meet demand.
At the same time, European countries, apart from fears of losing Russian gas supplies, may face another problem. Low rates of filling up storage facilities have leveled most of the spring gas surplus, and its volume has decreased from 70% to 20%. Gas reserves are already below last year's level, and the start of the heating season is just around the corner. A fuel shortage in the EU is unlikely to occur, but its further purchases will have to be made at significantly higher prices than in recent months.
With gas prices globally rising, US exporters are increasing LNG supplies. Over the last week, US companies shipped 25 LNG batches totaling 94 billion cubic feet (+4%) to the world market. American LNG suppliers are trying to take advantage of the favorable price situation. The increase in exports, in turn, is slowing the rate of filling up domestic gas storage. This is an important factor contributing to the further gas price growth.
The RSI indicator on the daily chart of natural gas continues to move upward, but is still far from the overbought zone. From the technical point of view, there are no apparent obstacles for reaching the level of 2.3 within the current growth wave. In case of success, the buyers' target will shift to 2.5.
The following trading strategy can be suggested:
Buy gas in the range of 2.1-2.2. Take profit – 2.3. Stop loss – 2.
This content is for informational purposes only and is not intended to be investing advice.
