On Monday, US natural gas prices showed a strong upward movement and reached 3-month highs. The increase by more than 15% surely provided the “bulls” with impressive profits, and in the following days they considerably reduced their activity. The sellers can take advantage of this situation by organizing at least a small price pullback. The correction of the natural gas price to 2.65 will compensate for the overheated technical indicators, leaving an opportunity for the subsequent resumption of growth.
The recent sharp rise in the U.S. natural gas price was facilitated by hurricane Helene approaching the Gulf Coast. Producers have already evacuated staff from offshore platforms, reducing the natural gas supply on the market. At the same time, according to the forecasts of American meteorologists, the hurricane will not affect LNG export plants, which will continue operations and keep strong consumption of raw materials. However, the scale of the gas price increase is clearly excessive compared to the change in the fundamental picture.
In an interview with Bloomberg, EQT CEO Toby Rice took a cautious view on the cost of natural gas in the United States. According to the head of the country's largest gas producer, prices will hover between $2 and $3 per million British thermal units for the foreseeable future. According to his estimates, the fuel surplus, accumulated as a result of the previous warm winter, will remain unabsorbed for at least 6 months.
At the same time, the EQT management intends to take advantage of the rising cost of natural gas and increase its production. The company is now cutting production by 1 billion cubic feet per day, but these production volumes can be restored in just a few hours. The cost of natural gas production for EQT is only $2, so current prices are enough for the company to significantly increase production and profits. Rice believes that other U.S. gas producers will also increase their supply of fuel, preventing prices from continuing to move upward.
The Stochastic indicator on the daily chart of the natural gas is heavily in the overbought zone, reflecting high risks of a correction. The nearest price pullback target is the level of 2.65.
We can offer the following trading strategy option:
Sell gas at the current price. Take profit - 2.65. Stop loss - 2.95.
This content is for informational purposes only and is not intended to be investing advice.
