US weather could be a catalyst for rising natural gas prices

The natural gas price fell by about 8% over the week. The prices are under pressure from rising gas production in the US, as well as low supply at LNG export terminals.

According to LSEG data, gas production in the contiguous United States reached 105.5 billion cubic feet per day in February compared to 102.1 in January.

Gas is getting cheaper even as new licenses for US LNG export projects have been suspended. US President Joe Biden made the decision last week to dissuade environmental activists that the entire cycle of LNG production, delivery and consumption is causing irreparable damage to the atmosphere. The administration will have extra time to verify the projects' compliance with the principles of energy security.

European countries were not happy about the decision. Eurasia is heavily dependent on American gas. For example, in the first half of 2023, European countries imported 70% of the 11.6 billion cubic feet of gas per day from the United States. Asia is also actively buying American gas.

The potential change in gas prices could be driven by forecasts of cooling temperatures in northern US states and increased heating demand in late February. On Wednesday, the Direct Energy Regulated Services (DERS) announced that the natural gas rate for this month is going to be more than double what it was in January.

Natural gas prices approached the strong support level of 1.943. In April 2023, the prices reversed after reaching this level and then they were in a long-term uptrend. The divergence of the RSI (standard values) on the H4 timeframe indicates a possible trend reversal.

Signal:

The short-term outlook for natural gas is to buy.

The target is at the level of 2.520.

Part of the profit should be fixed near the level of 2.250.

A Stop-loss could be placed at the level of 1.770.

The bullish trend is of a short-term nature, so it is suggested to limit the trading volume to no more than 2% of your capital.