• Gas prices reach their lowest levels in more than two years.
• There are concerns about the increase in US and European inventories.
• The Fairport LNG export facility has not yet returned to full capacity.

Spot natural gas prices (CFDS On Natural Gas) continued to decline during their early trading on Tuesday. It recorded net daily losses until the moment of writing this report by -1.70%, to settle at a price of $2.136 per million British thermal units. This happened after declining in yesterday’s trading by - 5.60%, reaching its lowest level since September 2020.

Natural gas futures are back where they started in the third quarter of 2020 after a bout of mild weather sent Henry Hub prices below $2.30.

Nine months ago, before a fire shut down the Freeport LNG shipping facility, natural gas was trading at more than $9 per million British thermal units. US inventories were about 300 bcf below five-year seasonal levels and there was concern that inventories were dangerously low.

Since then, mild weather and strong production growth have tipped the scales, with inventories recently rising to more than 180 bcf above seasonal measures, a dynamic that has also continued in Europe.

Markets await the US weekly inventories report from the Energy Information Administration to be published on Thursday. Early estimates of the drawdown huddled in the range of 60-70 bcf for the week ending Feb. 17. This compares to last year's drawdown of 138 bcf and average drawdown. amounting to 177 billion cubic feet for a period of five years.
 

Natural Gas Technical Analysis

Technically, the price continues its decline amid complete control of the main bearish trend in the medium and short term along a steep slope line. Negative pressure continued for its trading below the simple moving average for the previous 50-day period, as shown in the attached chart for a (daily) time. In addition, we note The presence of negative signals in the relative strength indicators, after earlier reaching highly overbought areas, in an exaggerated manner compared to the price movement, which doubles the negative pressures on its upcoming trading.

Therefore, our expectations indicate that natural gas will continue to decline during its upcoming trading, as long as it stabilizes below 2.432, targeting the psychological support level at 2.00.

(Click on image to enlarge)

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