US NATURAL GAS prices plunged by 13% to 5.5/MMBtu, the lowest level since March, as a result of investors' unfavourable reactions to recent EIA data that revealed a larger-than-expected storage build.
Last week, utilities in the United States added 82 billion cubic feet (bcf) of gas to storage, well beyond analysts' projections of 74 bcf.
NATURAL GAS prices in the United States are now 43% lower than their June 8 highs. The drop earlier this month was triggered by an accident at the Freeport LNG facility in Texas, which is one of the largest US export plants producing about 2 billion cubic feet per day of liquefied natural gas, or roughly 16% of US annual LNG export capacity.
Before June, NATURAL GAS prices skyrocketed owing to increasing export volumes at premium rates to Europe, as European countries weaned themselves off Russian supplies.
Technically, the 14-day RSI indicator has entered the oversold zone for the first time since December 2021. This could be an indication that the bearish momentum is starting to hit extreme levels, and buyers could start reappearing on the dip.
However, in the absence of a complete capacity recovery in the United States, which is not expected by the end of the year, the potential of shipping LNG gas from the United States to Europe at a premium rate is jeopardised, and US NATURAL GAS prices are unlikely to recapture prior highs in the short term.
Idea written by Piero Cingari, forex and commodities analyst at Capital.com