Henry Hub (US natural gas) prices have fallen 25% from their peak of $9.64 per million British thermal units (MMBtu) hit in June, as the fire at Freeport LNG’s natural gas liquefaction plant reduced U.S. export capacity by an estimated 2.0 billion cubic feet per day (Bcf/d) or approximately 15% of annual volumes.
The major driver behind the spectacular rise in US natural gas prices had been a rise in price-premium gas shipments to Europe, which was suffering from a drop in Russian supply.
As a complete cutoff of Russian gas supply to Europe looms, this should theoretically put upward pressure on US natural gas prices. In practise, however, the US Freeport LNG’s facility is not scheduled to resume at full capacity until 2023, thus pricing pressures owing to greater exports to Europe can no longer occur as they did previously. And the market has already factored this in. On top of this, there is also the risk of recession in the US looming on gas prices.
US Natural Gas Technical analysis
From a technical perspective, US natural gas prices may have entered a trend reversal phase following the RSI bearish divergence in June, when oscillator values fell from overbought levels as prices reached new highs.
This suggested that the bulls’ strength had progressively diminished, allowing the bears to take over.
In the last three trading sessions, the 50-day moving average level of $7.5 has acted as a strong resistance for US gas prices. This might pave the way for a price pullback towards the $6.5 support level.
A bullish breakout over $7.5 would invalidate the thesis and trigger a test of the psychological $8 mark.