Natural Gas Technical Analysis: Trying to Discharge its Oversold

Akram Adel

Our expectations indicate the likelihood of the scenario of the return of a decline in natural gas during its upcoming trading.

Spot natural gas prices (CFDS ON NATURAL GAS) rose in their recent trading at the intraday levels, to achieve slight daily gains until the moment of writing this report, by 0.53%, to settle at the price of $7.544 per million British thermal units, after it rose during yesterday’s trading by 3.89% .

After one of the biggest declines in the history of natural gas trading, futures rebounded on Wednesday as traders digested the impact of a major disruption in exports on a broader backdrop of strong global demand.

After dropping $1,420 in the Tuesday session following news that the Quintana Island, Texas Freeport LNG export project won't see a return to full service until late this year, the July contract in Nymex is up 23.1 cents a day and closed at $7,420. The August contract rose 22.6 cents to $7.406.

The Freeport outage caused by an explosion and a short fire last week translates into a loss of about 2.0 billion cubic feet per day of gas designated to be converted to liquefied for at least three months, not three weeks as initially reported by the company. Moreover, with full service postponed until around the end of 2022, export volumes at the facility are likely to remain below capacity at a time when global demand is supporting peak volumes.

As such it is now likely that the feed gas that would have found its way into Freeport for export, including injection, will now be used in storage. Other US LNG facilities are already maxed out and can't take in more. This means that lower supplies in the US relative to overall demand as summer approaches are bound to get a boost, helping to balance the market.

The US Energy Information Administration (EIA) read 97 billion cubic feet in lower storage 48 for the week ending June 3. Construction raised stocks to 1,999 billion cubic feet but supplies in storage remained 14.5% below the five-year average.

Technically, the price is trying with its recent rise to compensate for part of what it incurred from previous losses, and to drain some of its clear oversold by the relative strength indicators, especially with the beginning of the emergence of a positive crossover in them, and this is affected by the breaking of a minor bullish trend line in the short term, with the continued negative pressure of its trading below the average of the previous 50 days.

Therefore, our expectations indicate the likelihood of the scenario of the return of a decline in natural gas during its upcoming trading, especially in the event of its stability returning below the 7.368 level, after which it will target the support level 6.412.

Natural Gas

Akram Adel
Akram has experience working in the Forex industry since 2008. He works as a trainer and lecturer for technical analysis, trading strategies, and foundations of risk and capital management. In addition, he has experience with topics in the financial markets on many well-known sites that specialize in this field. Akram currently writes for a number of sites by providing accurate and professional articles and daily reports.

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