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Natural Gas Outlook: LNG Price Action Approaches Long-Term Resistance

Natural Gas Outlook: LNG Price Action Approaches Long-Term Resistance

Warren Venketas, Analyst

NATURAL GAS (HENRY HUB) ANALYSIS

  • LNG looks fundamentally bullish
  • Low storage - supportive of sustained upward price action
  • Key technical level breaks could prompt significant price moves
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LNG FUNDAMENTAL BACKDROP

LNG spot prices have surged fresh highs last seen in 2018. Fundamentally, demand from East Asia and the Pacific (green) region on the chart below has steadily increased. Asia is entering their summer period which traditionally comes with higher LNG demand due to rising temperatures. The Asian region is important to overall natural gas consumption as Japan and China are two of the largest importers of LNG globally. Weather analytics will play a key role as the Asian summer develops because any unexpected rise in summer temperatures could spark unforeseen demand.

LNG EXPORTS BY REGION

LNG exports by region

Chart prepared by Warren Venketas,Refinitiv

The supply side shows a slight uptick in inventory as per last week however, compared to last year and the 5-year average current inventory data is significantly lower. This supports the present bullish bias surrounding LNG spot prices.

LNG STORAGE DATA

LNG storage figures

Chart prepared by Warren Venketas,EIA

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NATURAL GAS TECHNICAL ANALYSIS

Natural Gas Weekly Chart:

Natural Gas weekly chart

Chart prepared by Warren Venketas, IG

The weekly natural gas chart highlights the long-term trendline resistance level (black) that has previously been tested in late 2018. This trendline has held firmly for many years and recently has come into consideration as a consequence of bullish LNG price action. The 4.000 psychological zone coincides with trendline resistance which could be key should prices close higher at the weeks close.

Natural Gas Daily Chart:

Natural gas daily chart

Chart prepared by Warren Venketas, IG

The daily chart illustrates the strong upward move earlier this week as LNG prices broke above the rectangle pattern (yellow). Bullish momentum seems to be slowing according to the Relative Strength Index (RSI) which opposes current price action. Opposing movements between the two point to divergence – more specifically bearish divergence which may see prices retrace lower.

Bears will be looking for a reversal with the 20-day EMA as initial support after which the 61.8% Fibonacci at 3.963 will come into consideration – Fibonacci taken from November 2018 high to June 2020 low.

From the bullish perspective, a break above 4.000 could support further upside towards the 76.4% Fibonacci at 4.128.

--- Written by Warren Venketas for DailyFX.com

Contact and follow Warren on Twitter: @WVenketas

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES