Natural Gas Outlook: EIA Storage To Shed Light On Chinese Imports Of LNG

LNG Fundamental Backdrop

LNG spot prices soared this week (+/- 10%) after colder than expected weather forecasts were announced. Many parts of the U.S. are experiencing their coldest weather this winter which may sustain the rising spot price.

Tomorrow, the EIA weekly storage report will be released which could stir additional volatility leading up to and post announcement. The chart below shows the cyclical nature of storage throughout the year. Winter reflects a depletion in stocks as demand rises which naturally results in a higher LNG spot price. This year spot prices have remained relatively subdued however, there is an improvement over last year's prices with similar storage figures.

EIA Natural Gas Change (Bcf) Vs Henry Hub Natural Gas Futures Price

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Chart prepared by Warren Venketas,Refinitiv

The Chinese have been on an importing binge of major commodities in 2021 which includes Liquefied Natural Gas. This could potentially reflect in storage data tomorrow.

The rise in LNG importing seemingly commenced back in August 2020 and has progressively increased as reflected in the chart below (green). Not all regions have followed this trend as the Middle East and North Africa (pink) have reduced their LNG imports from the U.S. albeit on a much smaller scale.

U.S. Exports of LNG Delivered by Region

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Chart prepared by Warren Venketas, Refinitiv

Natural Gas Technical Analysis

Natural Gas weekly chart:

(Click on image to enlarge)

Chart prepared by Warren Venketas, IG

Natural Gas daily chart:

(Click on image to enlarge)

Chart prepared by Warren Venketas, IG

The week started strong for LNG bulls as prices pushed above the November 2019 high (2.9225) but soon retraced below. This resulted in yesterday's long wick candle formation which is suggestive of price rejection at the 2.9225 level. The Relative Strength Index (RSI) indicates current bullish momentum as the indicator sits above the 50 level. This short-term sideways move may not be enough to confirm a reversal in trend as the medium-term trend remains to the downside.

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