Gas prices, as expected in the previous forecast, kept increasing and rose above the level of 3 for the first time since January. At this point, a large number of traders willing to lock in profits on long positions led to a correction taking place. Gas quotes pulled back to the level of 2.8, and buyers took the initiative again. The technical picture on the natural gas chart has improved, and from a fundamental point of view, the situation looks moderately optimistic.
According to Reuters, hedge funds are back to buying natural gas contracts after a week-long pause. The net long position in the gas market rose by 332 billion cubic feet to 1.123 trillion cubic feet. This is the highest level since April 2023. The gas surplus in the U.S. market decreased by another 1% to 26%. Reuters analysts believe that the fuel surplus will not be completely eliminated before the start of the next heating season. Nevertheless, hot weather and the growth of U.S. LNG exports may accelerate the process.
Meanwhile, the European gas market is also experiencing a “bullish” revival. According to the InterContinental Exchange report, the number of investors’ long positions reached the maximum since January 2022. Despite gas storage facilities in the EU being 73% full, traders see significant risks of fuel supply disruptions. The main concerns are connected with risks of a halt to gas exports from Russia, as well as accidents at Norwegian pipelines.
Another factor driving up gas prices may be the increased competition between the EU countries and Egypt. The African country has announced a tender for the supply of 17 LNG batches for the next 3 months. In order to successfully conclude the deals, the Egyptian authorities are ready to pay a premium of 1 to 2 dollars per million British thermal units compared to European gas quotes. This could lead to similar price increases in Europe as well.
The Stochastic indicator on the daily chart of natural gas quotes reached the oversold zone and turned upward, forming a buy signal. The nearest target for an uptrend could be the level of 3.1.
Consider the following trading strategy:
Buy gas at the current price. Take profit – 3.1. Stop loss – 2.8.
