Selling natural gas with target of 2.900 amid warm weather in US and Europe

Natural gas started Thursday’s trading session with a decline after opening at 3.129. Since early April, gas has been falling on rising production and forecasts of warmer weather in the US and Europe. These factors have been weighing on gas prices. 

Mild weather in the US and Europe is expected until early May, which curbs demand for heating gas. Above-average temperatures are allowing US utilities to build gas stocks, although there is still the deficit of 3% to the five-year average. Warm weather in Europe is also reducing gas consumption, and strong deliveries of liquified natural gas (LNG) to Dutch hubs are adding to confidence that the reserves will be replenished. 

Gas prices are also pressured by the US gas output, which remains at the record high level of 106.4 billion cubic feet per day in April. However, routine maintenance at pipelines, including the Kinder Morgan facilities, has temporarily cut production to 105 billion cubic feet. Domestic surplus is partially offset by the rise in LNG exports to 16.2 billion cubic feet per day due to the increased capacity of Venture Global’s Plaquemines plant. 

Meanwhile, countries in Asia are ramping up US LNG imports in an attempt to offset the trade imbalance and minimize the risks of new duties. This may give an extra boost to demand. 

Mild weather and seasonal demand drop are the main drivers for prices. At the same time, the market remains under bearish pressure due to macroeconomic uncertainty and declining global trade. 

At the moment, the market is in a bearish phase. Despite the RSI being around 21, close to the oversold area and signalling a potential correction, other indicators, such as moving averages and MACD, are pointing to a steady decline in prices. In this situation, even with the RSI in the oversold zone, it is advisable to be cautious when considering buying and focus on selling opportunities.

Current recommendation:

Sell at the current price. Take profit – 2.900. Stop loss – 3.300.