Natural Gas Could Continue to Rise as Stocks Fall

Natural Gas is a naturally occurring fossil fuel, found deep inside the earth’s crust. The commodity has moved from being an unwanted resource to one of the most important in the world. When it was discovered, many producers did not know what to do with it. In the past few years, natural gas has become an important resource in power generation. It is also used for home and office heating around the world. Power producers love it because it is cleaner than coal and is more reliable. It is found in large quantities in countries like Russia, Iran, Qatar, Turkey, and United States.

Year to date, the price of natural gas has declined by almost three percent. In the recent months however, the price has moved higher. This is attributed to the news cycle that has hit the industry. The first news was on trade where the world entered a new phase with the major economies increasing tariffs. China has increased tariffs on US-sourced natural gas. Second, the EIA has recently announced that the stocks on natural gas were falling as shown below. In the recently released report, the total natural gas stocks were at 2.387 Bcf, which was 24.1% lower than where we were last year.

Third, the United States under Trump has voiced its criticism for the Nordstream gas project. This project will supply natural gas to Germany from Russia. Instead, the US has suggested that Germany – which is a member of NATO – should use US natural gas. This would be expensive for Germany because there is no pipeline between the two countries. Instead, the US would be required to liquify the gas and transport it using tankers, which would be expensive.

The price of natural gas has currently reached $2.922, which is slightly lower than the recent high of $2.974. This price is above the 50 simple moving average and slightly below the 25 SMA. The RSI is currently at 51, which is lower than the recent highs of more than 70, but still in the overbought region. In the near term, the price of natural gas is likely to continue moving lower, although the upward trend might continue.

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