An explosion at the Freeport LNG facility in Texas sent natural gas prices down. This strange decline was due to concerns over market share loss. I.e., traders worried over domestic supply being unavailable for export. In this regard, Freeport stated that its "liquefaction facility is currently shut down and will remain shut down for a minimum of three weeks." There are no reports of injuries, and investigations are ongoing.
However, this decline in NGAS is interesting, given the instrument's primary trend.
The NGAS price has spiked since Russia invaded Ukraine on 24 February (red dashed horizontal). This bullishness is unsurprising as the energy supply has been heavily affected following the invasion. The World Bank writes, "The war is also leading to more costly patterns of trade that could result in longer-lasting inflation. Similar diversions are occurring with natural gas and oil."
In addition, CNBC reports that US supplies are tight, with storage at a deficient level. At the same time, it is challenging to build inventories, with storage levels "18% lower than last year and 16% lower than the five-year average."
Consider FXCM's weekly chart of NGAS:
The price is now trading in its bullish zone between its upper blue and red bands. Moreover, the stochastic maintains its position in the upper quintile (orange shaded rectangle). As long as this level holds, momentum pressure will be to the upside. Given this, any dips in the uptrend will be compelling.
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.