Is Natural Gas Trading at Trend Reversal Level?

Natural gas posted two and a half per cent intraday gain yesterday. Prices jumped to their two-week high, amid as the output cut perspective is beginning to influence trading in U.S. natural gas. Which rose almost 4.20% Monday.

The front-month gas contract on the New York Mercantile Exchange’s Henry Hub settled at $2.476 per metric million British thermal units, up 4.34%.  MCX Natural gas prices rose by 2.59% and settled at 194.50.

Gas prices have been stuck between 175-205 levels since mid-March from benign weather. There isn’t much of a demand for cooling or heating. Topping that off has been the fuel’s steady production, which has constantly increased to the supply excess of gasoline.

Talk of output cuts has gained momentum in the gas market in recent weeks. Supported by a decrease in drilling rigs, which directly affects production.

The total count of oil and gas rigs in the United States fell by 17 for the week ending May 12 to 731. Since June 2022, this level has been at its lowest. The weekly decline is the largest dip since June 2020, according to previously unreleased U.S. Energy Information Administration.

However, despite the decline, the overall U.S. rig count is up by 17, or 2%, from a year ago.

Technical Outlook

Since Mid March, Natural gas prices have been stuck in between the range of 175-200. Prices are consolidating in between the above range.

Yesterday, it gained 2.50% and settled at 194.50 levels, near its first resistance levels.

On the above daily chart, prices trading on the verge of short-term consolidation resistance at 201.50, a break above it will open the door for the next resistance at 210.00-215.00

On the downside, immediate support is seen at 180.00 a break below will expect to retreat below 165.00 again.

In the near future, trends are expected to remain somewhat positive, as, after the drastic fall since November 2022, prices may consolidate above 162.50 on a closing basis.

Hence, any dip towards 188-185 will give a buying opportunity for target 210.