Upward trend not disrupted by local pullback in gas prices

US gas prices began the current week with a correction, but its magnitude was small and did not lead to a break in the medium-term uptrend. As a confirmation of this, Thursday's trading session ended with a strong rebound of almost 6%, bringing the price back to the area of the round 4 mark. If the sellers fail to regain the initiative by the end of the week, the main scenario for the gas market will be a recovery to the recent highs and the 4.25 level.

The temporary weakness of the bulls in the gas market was caused by severe frost across much of the US. While low temperatures are boosting heating demand and shutting down production at some fields, they are also making it difficult to load LNG onto tankers. This situation is traditionally temporary and will soon fade from the agenda, leaving room for stronger fundamentals to take hold.

In particular, analysts are beginning to revise their expectations for the US gas sector under Donald Trump. The newly inaugurated president has called for a massive increase in hydrocarbon production, but industry realities do not support such a development. According to Reuters, the current price level is not high enough to expand production capacity. Trump's administrative decisions are unlikely to change the conservative policies of the management of private US oil and gas companies.

On the demand side, there is also an important prerequisite for further increases in the cost of gas. A Reuters analysis shows that European countries will need about 100 additional LNG shipments this year due to the loss of much of the pipeline gas supply from Russia. EU stockpiles are already less than 60% full, compared with an indicator of about 75% a year ago. By the end of March, the indicator risks falling below 30%, pushing gas prices higher.

The Stochastic indicator's lines confirm the upward reversal and a high probability of reaching the 4.25 level in the coming days.

Consider the following trading strategy:

Buying gas at the current price. Take profit - 4.25. Stop loss - 3.7.