Natural gas prices in the US have fallen from August highs in recent days and approached the important level of 2. Earlier this month, the bears had already pushed the price below this level, but gas buyers took advantage of the opportunity to profitably open long positions. The rebound of the gas price has a short-term upside potential up to the level of 2.25, where it’s worth fixing at least part of the profit.
The European gas market turmoil, caused by the risk of a supply cutoff from Russia, is gradually subsiding. According to Intercontinental Exchange data, over the last week net long positions on gas in the EU decreased by 1.25%. This value went negative for the first time in 6 weeks, but the overall indicator remains near the highs of the last 3 years. Disruptions in Russian exports are by no means the only risk factor in the European energy market.
Javier Blas, Bloomberg analyst, notes that gas prices in the EU remain at high levels despite the fact that the storage facilities are filled to 90%. At the same time, a significant part of reserves remained from the last heating season, which allowed to reduce summer LNG imports on the continent. However, now Russian gas exports to the EU may stop, and exports from Norway will be reduced in the next 2 months due to the maintenance season. This can facilitate another round of energy crisis and price hikes.
Meanwhile, LNG exporters in the US are ready to take advantage of a new wave of growth in fuel prices. Last week, their deliveries to the global market increased by a third to 99 billion cubic feet. Low domestic gas prices are stimulating LNG exports, which is slowing the growth of fuel stocks ahead of winter. This trend will sooner or later lead to an increase in gas price in the US market as well.
The bulls traditionally increase their activity around the level of 2, causing gas prices to rebound. The chances of that happening are high, and the target of the upward correction will be 2.25.
The following trading strategy can be suggested:
Buy gas in the range of 2–2.1. Take profit — 2.25. Stop loss — 1.9.
This content is for informational purposes only and is not intended to be investing advice.
