Commodities Watchlist: Buying Opportunity for Natural Gas?

In case you missed it, Germany has entered the SECOND alert level of its emergency gas plan one week after Russia started tightening its gas supplies in the region.

The alert meant that companies are encouraged to find alternative supply sources, and that they may soon pass on their increased costs to its consumers.

Germany’s minister for economic affairs and climate action noted that the country should enter its THIRD alert level, then extreme measures such as rationing will be on the table. Yipes!

The announcement has boosted the prices of Benchmark Dutch futures contracts from a high of $118 last week to $145 so far this week.

Natural Gas Daily Chart

Meanwhile, spot prices of US natural gas are seeing bearish candlesticks thanks to Freeport LNG, a major liquefied natural gas export facility in Texas, bursting into flames and boosting local gas supplies.

Thing is, Freeport LNG is a facility that supplies Europe with gas. The longer the facility is out of commission, the longer other US facilities will deal with higher demand from Europe. They could raise their prices!

NATGAS is currently flirting with the $6.00 psychological support.

As you can see, $6.00 is not far from the daily chart’s 200 SMA, trend line support, and a key resistance zone in late 2021. Even Stochastic is on the bulls’ side with an oversold signal.

Buyers can start scaling in long positions at the first signs of sustained bullish pressure.

The $6.70 area is a good initial target though you can also eye inflection points like $7.50 or even $9.00 depending on the momentum we see in the next trading sessions.

This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.

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