12.12.2023 – Just like the first snow at the end of November, the price of natural gas has melted away. It is too mild for a bull market, not only in Europe but also in the USA.
The bears have been celebrating their feast for weeks: high inventories and weather forecasts predicting a much warmer winter than usual have sunk prices. Here is the daily chart of US gas. From a technical point of view, an important support level of around 2,550 dollars per million British thermal units (MMBtu) has been broken – the next stop will probably be 1,950, according to the experts at economies.com. We are more likely to see 2,510/2,500 (see red lines), but no matter – the trend is the same.
Source: Bernstein Bank GmbH
The weather website NatGasWeather.com commented on the latest events: “The weekend data failed to trend any colder with the setup through Dec. 26 suggesting warmer than normal temperatures and lighter than normal demand will continue through the end of the month.”
The storage tanks are full
In addition, the heating season in the US has started with the highest storage levels since 2020, as the U.S. Energy Information Administration (EIA) announced last week. Specifically, the storage volume is 5 per cent above the five-year average. The mild winter of 2023/2023 and increased savings on heating had already ensured a high fill level in gas storage facilities. As a result, the tanks were 19 per cent fuller on 1 April than in the previous five years.
China and the Saudis
And then there is the UN Climate Change Conference COP 28, where there was a lot of talk and concrete action remains to be seen, but for the first time, Saudi Arabia, a major gas producer, has tentatively supported the willingness to reduce the use of fossil fuels, as the website “FXStreet” explained. Furthermore, fears of deflation in China – i.e. a recession – are spreading, which is likely to significantly reduce demand for liquefied natural gas.
Our conclusion: There are currently hardly any arguments in favour of a new natural gas boom. It is not only in this country that people are holding back on turning up the heating, if only to reduce their dependence on Russia. Many households have switched to firewood and prices have roughly doubled since last year. And if it’s just as dingy and wet and cold as it is now, then simply wearing warmer clothes at home helps. We look forward to seeing what happens next and wish you successful trades and investments!
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