Natural gas pullback looks like buying opportunity

[MongiIG]

Natural gas pullback brings potential buying opportunity, with concerns over winter supply expected to drive price up through $10

Source: Bloomberg

 Joshua Mahony | Senior Market Analyst, London | Publication date: Wednesday 24 August 2022 

Natural Gas pullback brings potential buying opportunity

Natural gas has been rare bright spot over the course of this year, with prices continuing to surge on the back of supply constraints. The Russian invasion into Ukraine brought great friction with Europe, ultimately leading many to shift away from Russian imports. The process of shifting supply will take time, and continued issues facing the Nord Stream 1 pipeline point towards difficulties getting gas even if they want it. This issue has reared its head once again recently, with Gazprom planning to lock off flows for ‘maintenance’ between 31 August and 2 September. The natural gas chart below highlights the pricing at Henry Hub in the US. However, with the US increasingly exporting to Europe, supply is similarly tightening to the benefit of prices. The impending winter brings the certainty of higher demand for gas, with some fearing possible restrictions for businesses. With that in mind, there is a good chance we see further upside as we move forward.

The chart below highlights how Natural Gas has managed to push into the crucial $9.655 resistance level this week, with price hitting $10 for the first time since 2008. While we have seen a pullback since, there is a good chance that the bulls come back into play before long.

Source: ProRealTime

The four-hour chart shows how price has dropped back into the 76.4% Fibonacci support level, with the selling pressure easing off since. With that in mind, another push up through the $10 mark looks likely as we see to build on this bullish trend.

Source: ProRealTime