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Natural Gas Technical Analysis: Price is Trying to Discharge its Oversold – 28 September 2022

We attribute the price stability in its recent trading to its need to compensate for part of its previous losses.

Spot natural gas prices (CFDS ON NATURAL GAS) slightly increased in the recent trading at the intraday levels, to achieve slight daily gains until the moment of writing this report.It increased by 1.25% to settle at the price of $6.742 per million British thermal units.This happened after the index dropped by -3.76. % Yesterday.


U.S. natural gas futures fell nearly 4% on Tuesday, hitting a 10-week low as Hurricane Ian advanced toward Florida. This occurred amid forecasts of milder weather over the next two weeks. Because of this, gas demand is likely to slash, leading to a sharp drop in gas demand, increasing stocks.

After hitting Cuba, the US National Hurricane Center (NHC) forecast that Hurricane Ian will cross the Gulf of Mexico and move into southwest Florida later Wednesday as a major storm with winds of up to 125 miles (201 kilometers) per hour.

Only about 2% of US natural gas production comes from the Gulf of Mexico, and most of it comes from shale basins such as the Permian in West Texas and Marcellus in Pennsylvania. It causes the closure of LNG export terminals.

Meanwhile, the gas was trading at around $54 per million British thermal units in Europe, and at $42 in Asia. This was an 11% increase in prices in Europe due to leaks in Nord Stream pipelines from Russia to Germany.

Russian gas exports via the three main lines to Europe averaged just 1.3 billion cubic feet per day in September, down from 2.5 billion cubic feet per day in August and 10.8 billion cubic feet per day in September last year.

Technically, the bearish corrective trend dominates the movement of natural gas in the short term, with continuous negative pressure for its trading below the simple moving average for the previous 50 days.

In addition to that, it is affected by a negative technical pattern formed earlier, which is the head and shoulders pattern, as shown in the attached chart for a period. We attribute the price stability in its recent trading to its need to compensate for part of its previous losses. It is also trying to discharge some of its clear oversold using the relative strength indicators, especially with the beginning of a positive crossover in them.

Therefore, we expect natural gas to decline to complete the bearish corrective trend in the short term, to target the 3.338 support level.

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