Selling natural gas with a target at 2,780 amid warm weather and lower exports

Natural gas prices stabilized on Thursday after an impressive 3.8% increase the day before. The rise was driven by forecasts of colder weather in the U.S., increased heating demand, alongside a rise in gas flow to liquefied natural gas (LNG) export facilities.

Nevertheless, the season of high gas prices may end earlier than usual. An unusual contango between March and April contracts, with April prices being higher than in March, is rare for the market. March is the usual end of the natural gas withdrawal season, and April is the first month of the summer storage injection season. Because gas is primarily a winter heating fuel, summer prices typically don’t trade above winter ones.

In terms of short-term forecasts, meteorologists projected the weather would remain mostly warmer than normal through Dec. 26. According to LSEG, average gas demand, including exports, would drop from 128.8 Bcf/d this week to 123 Bcf/d next week.

In addition, rising liquefied natural gas prices have also affected the world's largest consumer’s trade activity. China has reduced purchases and started reselling part of its supplies. This weakened competition in the LNG market during the winter heating season, reducing the price of the energy carrier.

From the technical point of view, natural gas prices are in an upward trend on the daily chart (D1). However, the price, being close to the trend resistance, has repeatedly pulled back. Divergence of the RSI on the H4 timeframe indicates a possible change in the price movement direction to the center of the channel.

Signal:

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

The target is at the level of 2,780.

Part of the profit should be fixed near the level of 3.130.

The Stop loss can be placed at 3,730.

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