Gas prices rebound from channel’s lower boundary

As previously anticipated, natural gas prices broke below the level of $3, setting a new yearly low slightly under $2.75. The descending channel—originating from June's peak— retains its strength. However, the price has reached its lower boundary, from which it is now trying to rebound, with the potential to retest $3. A successful rebound could lead to a channel breakout.

On the daily chart, the Stochastic lines have entered oversold territory. The upcoming crossover could soon generate a buy signal, which the RSI indicator has already issued. On the 4-hour timeframe (H4), there has been bullish divergence since late July. Sellers retain control as prices are trading below all major moving averages, but the 20-day EMA is now approaching $3, which makes testing it even more important.

In its recent report, the US Energy Information Administration (EIA) revised the outlook for average gas prices in the second half of the year down by 3%. Nevertheless, even the level of $3.6 per million British thermal units implies a nearly 30% increase in fuel prices relative to current levels. Prospects for 2026 are even more optimistic, with the average cost of gas rising to $4.3 per mmBtu.

Except for summer heat, which is gradually subsiding, liquefied natural gas (LNG) exports are another driver for demand. According to the EIA data, US LNG supplies to the global market would rise by about 23.5% to 14.7 billion cubic feet per day (Bcf/d) in 2025. A record of 16.3 Bcf/d (+11%) is expected next year. Gas prices would be supported by cheaper oil. Lower crude output would automatically lead to less extraction of associated gas.

Consider the following trading strategy:

Buy natural gas at the current price. Take profit: $3. Stop loss: $2.7.