Record US gas exports push domestic prices higher

Yesterday, US natural gas prices rebounded from a two-week low and surged by more than 3%. The bears failed to consolidate below the important level of $4 per million British thermal units (MBtu). The positive news background gives the buyers an opportunity to get back to the level of 4.45, after which the way to the highs set on March 10 will be opened.

Despite warmer weather, the decline in US gas demand is rather limited. The cold winter reduced the amount of natural gas in US storage facilities, with current reserves being 11% below the seasonal average. The country's gas production is likely to set a new all-time high by the end of March, but this is still not enough to worsen market sentiment. The reason is rising LNG plant demand for gas.

Reuters estimates that feedstock deliveries to the 8 largest US LNG facilities rose to 15.7 billion cubic feet per day in March, up from February's record. The increase was due to the commissioning of new units at Plaquemines LNG plant in Louisiana. At the same time, the latest weather forecasts no longer predict a sharp rise in temperatures in most of the United States until early April, so the weather is expected to remain within normal limits. This is another factor in favour of steady gas demand.

Meanwhile, the national authorities do not intend to stop there. Yesterday, the administration of Donald Trump granted Venture Global permission to export LNG from its CP2 project, which is currently at the stage of approval. Operating at maximum capacity, the facility will be able to increase LNG supplies to the global market from the United States by almost 25%, while domestic consumption of raw materials will increase by more than 3%.

The Stochastic indicator turned upwards from the oversold zone, forming a buy signal. Gas prices have a good chance to rise to the level of 4.45.

Consider the following trading strategy:

Buy gas at the current price. Take profit — 4.45. Stop loss — 3.95.