Buying natural gas to $2.45 amid demand stabilization and technical oversold condition

Gas prices stabilized on Thursday after declining 0.80% the previous day. This reflects the current supply-demand balance in Europe this fall. At the same time, the gas market didn’t react properly to the broad rally triggered by the start of the Fed’s interest rate cut cycle.

Liquefied natural gas terminals in Europe saw demand drop by 20% year-on-year, with average utilisation falling 50% in the Q1 2024. These data indicate an overall decline in the LNG market in the region.

The research, conducted by the Institute for Energy Economics and Financial Analysis (IEEFA), suggests that European nations have passed peak LNG consumption, despite significant infrastructure investment following the decline in Russian pipeline gas supplies. As a result, a number of countries have postponed or canceled plans to build new terminals. Such projects have been put on hold in Albania, Cyprus, Ireland, Latvia, Lithuania and Poland since 2023, while plans for three terminals in Greece remain uncertain.

Meanwhile, the Fed cut its key interest rate by 50 basis points on Wednesday. However, natural gas prices declined due to a stronger dollar, which was supported by comments from the regulator's head Jerome Powell. As he noted, the Fed doesn’t intend to continue such an aggressive easing of monetary policy.

From the technical point of view, natural gas price is forming a broad upward correction on the H4 timeframe. The Stochastic Oscillator (standard values) is in the oversold zone, and exit from it may strengthen the growth within the correction channel.

Signal:

The short-term outlook for natural gas is to buy. 

The target is at the level of 2,450.

Part of the profit should be fixed near the level of 2,375.

The Stop loss could be placed at the level of 2,180.

The bullish trend is of a short-term nature, so it is suggested to limit the trading volume to no more than 2% of your capital.