“I’ve seen gluts not followed by shortages, but I’ve never seen a shortage not followed by a glut” – that’s a famous commodity trader’s saying. First, everyone panics about the supply problems, then it turns out that adjustment measures lead to oversupply. We don’t claim Natural Gas will continue to fall, but today despite the accident and leak in two critical pipelines, the prices went down again.
Technical analysis traders can be proud of themselves, while those who went long on gas on the Nord Stream leakage news still need to wait.
Concurrent problems were reported with the Nord Stream 1 and 2 pipelines. The transfer of Russia to Germany is disturbed, which puts more pressure on the two sides. Moscow wants to sell, and Berlin needs the gas, but the prices are falling.
The situation is crazy. European and Russian officials say about possible sabotage, which seems probable as the leak simultaneously appeared in separate pipelines. Fortunately, the leaks did not threaten energy supplies and experts said the environmental impact would be limited.
Now to the Natural Gas spot prices. Since yesterday evening UTC, the prices surged 7.6% to over $7 per MMbtu, but the leakages didn’t move them much. When the news spread that the damage was not severe, the price dropped by 4% below $6.8 per MMBtu.
Since August 21, we have been in a bear market for NATURALGAS. Technical analysis seems to predict prices better than the news analysis, as we are constantly bombarded with supply concerns due to the escalation in Russia.
The breakaway on September 14-15 and huge spark to $9.257 seems like an anomaly from today’s perspective, as the daily chart returned to our red channel. If natural gas stays in these boundaries, we’d expect resistance at $7.167 around October 1. Of course, there are lots of geopolitical events that may disturb it.
Now, please take a look at the alternative bullish channel. To draw it, we need to go back to the top at the beginning of February 2022, before the Russian invasion of Ukraine. However, the chart broke away from this pattern on September 22, when a massive crash in natural gas happened. Going back to the bullish channel is still possible since we’ve seen substantial commodity swings this year.
For the upcoming pullback, the $5.465 support marked by the horizontal line seems the right target.
Trading Natural Gas should be a fun, high-risk, high-reward thing this winter. Make sure you follow the weather forecast for Europe.