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Natural Gas Technical Analysis: Price Falls, Tensions Ease – 29 March 2022

We expect the rise of natural gas to return during its upcoming trading.

Spot natural gas prices (CFDS ON NATURAL GAS) slightly decreased during the recent trading at the intraday levels, to record slight daily losses until the moment of writing this report, by -0.46%. It settled at the price of $5.437 per million British thermal units, after it decreased in yesterday’s trading by 1.71%.

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Natural gas prices fell on Monday and settled lower as traders weighed evolving weather patterns and the potential for storage injections against steady production. There was continued strong demand for US exports, while traders remained focused on developments surrounding Russia’s invasion of Ukraine. This comes after the Financial Times reported that Russia might be willing to accept less stringent conditions in cease-fire talks than it had previously demanded.

Nymex gas futures for April settled at $5.508 per million British thermal units, down 6.3 cents on the day in the last trading day of the contract.

US natural gas production held steady at 95 billion cubic feet for the past week, according to Bloomberg estimates, well below its late 2021 highs near 97 billion cubic feet. Production has struggled to gain momentum in part due to weather outages and maintenance work, but also due to modest production of associated gas. Associated gas is a by-product of oil production, which has held steady in 2022 despite strong demand and rising prices.

Meanwhile, demand for LNG is hovering near record levels above 13 billion cubic feet. This was the case throughout the war in Ukraine, which is now in its second month.

US shipments of LNG that was already in high demand before the Russian invasion of Ukraine are now being ordered due to increasingly depleted global supplies. European countries have pledged to end their dependence on Russian energy due to the conflict, and the United States and other countries need to fill their stockpiles.

Technically, natural gas declined due to the stability of the current resistance level 5.710. This is the resistance that we talked about in our previous reports. This was the price target for the previous price hikes, to reap its profits and try to gain positive momentum that might help it breach that resistance. At the same time it tries to drain some of its overbought. This is evident in the relative strength indicators, especially with the start of negative signals from them.

All of this comes considering the dominance of the main bullish trend over the medium term along a slope line, as shown in the attached chart for a (daily) period, supported by its continuous trading above its simple moving average for the previous 50 days.

We expect the rise of natural gas to return during its upcoming trading, provided that it first breaches the resistance level 5.710, in order to assure us of its intention to rise, to then target the pivotal resistance level 6.412.

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