Rebound from July open could fade as US inventory improves

Natural Gas, LNG, Freeport, Inventory, Technical Outlook – Talking Points

  • Natural gas sinks more than 16% overnight in New York, ending a brutal June
  • U.S. inventory levels rise more than expected, posing a headwind to prices
  • The 200-day simple moving average (SMA) could come under pressure shortly

Natural gas prices plunged more than 16% overnight, falling to their lowest level since March 2022. The drop extended a broader decline from June, when prices hit a record high. Now down more than 40% from that high, it looks like the bears are firmly in control. Prices still need to fall by almost $2.00 per million British thermal units (MMBtu) before erasing the January 1 gains.

The European benchmark, priced at the Virtual Dutch Securities Transfer Facility, is up more than 12% this week. Europe faces a potentially disastrous winter after the loss of its Russian supply. EUrope turned to the United States for liquefied natural gas (LNG) to diversify its supply, but a catastrophic failure at a US export facility effectively crippled the flow of that LNG. In addition, US regulators require the operator of the facility, Freeport LNG, to develop security plans before authorizing repairs.

Prices may not continue falling for long, with the National Weather Service’s 6-10 day temperature forecast showing above-average chances for warmer-than-average weather across much of the continental United States. United. Higher temperatures generally translate to higher demand for natural gas due to the strain on the power grid when thermostats are lowered.

Meanwhile, the Energy Information Administration (EIA) reported an 82 billion cubic feet (Bcf) increase in US inventory levels for the week ending June 24. It was above the 74 Bcf expected by analysts. Overall, the reduction in flows to Europe should make it possible to maintain an artificial cap on prices in the United States even if temperatures soar.

Natural Gas Technical Forecasts

Prices broke below the 61.8% Fibonacci retracement level, which offered support last week. The 200-day simple moving average then broke above before prices rebounded above the SMA at the start of APAC trading. The rebound in prices looks modest and could be a short countermeasure after the sharp decline. The bears may attempt to pull prices back below the 200-day SMA in the coming days.

Natural Gas Daily Chart

Chart created with TradingView

— Written by Thomas Westwater, Analyst for DailyFX.com

To contact Thomas, use the comments section below or @FxWestwater on Twitter

element inside the

element. This is probably not what you wanted to do! Upload your application’s JavaScript bundle to the item instead.