EIA Storage to Shed Light on Chinese Imports of LNG

NATURAL GAS (HENRY HUB) ANALYSIS

Weather and storage data key driversChinese demand influential

LNG FUNDAMENTAL BACKDROP

LNG spot prices soared this week (+/- 10%) after colder than expected weather forecasts were announced. Many parts of the U.S. are experiencing their coldest weather this winter which may sustain the rising spot price.

Tomorrow, the EIA weekly storage report will be released which could stir additional volatility leading up to and post announcement. The chart below shows the cyclical nature of storage throughout the year. Winter reflects a depletion in stocks as demand rises which naturally results in a higher LNG spot price. This year spot prices have remained relatively subdued however, there is an improvement over last years prices with similar storage figures.

EIA NATURAL GAS CHANGE (Bcf) vs HENRY HUB NATURAL GAS FUTURES PRICE

natural gas storage

Chart prepared by Warren Venketas,Refinitiv

The Chinese have been on an importing binge of major commodities in 2021 which includes Liquefied Natural Gas. This could potentially reflect in storage data tomorrow.

The rise in LNG importing seemingly commenced back in August 2020 and has progressively increased as reflected in the chart below (green). Not all regions have followed this trend as the Middle East and North Africa (pink) have reduced their LNG imports from the U.S. albeit on a much smaller scale.

U.S. EXPORTS OF LNG DELIVERED BY REGION

U.S natural gas exports

Chart prepared by Warren Venketas,Refinitiv

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NATURAL GAS TECHNICAL ANALYSIS

Natural Gas weekly chart:

natural gas weekly chart

Chart prepared by Warren Venketas, IG

Natural Gas daily chart:

Natural gas daily chart

Chart prepared by Warren Venketas, IG

The week started strong for LNG bulls as prices pushed above the November 2019 high (2.9225) but soon retraced below. This resulted in yesterdays long wick candle formation which is suggestive of price rejection at the 2.9225 level. The Relative Strength Index (RSI) indicates current bullish momentum as the indicator sits above the 50 level. This short-term sideways move may not be enough to confirm a reversal in trend as the medium-term trend remains to the downside.

The weekly chart may be forming a rising wedge pattern which could imply a continuation of the medium-term downtrend should prices break below wedge support (yellow).

Bulls will continue to target the 2.9225 resistance with a subsequent push toward the 3.0000 psychological level.

The bearish perspective gives room toward the lower rising wedge support trendline however, there may be further short-term upside to come. 2.7805 may serve as initial support while the January swing low (2.5565) will follow should initial support be broken – the 2.5565 support level will likely coincide with the rising wedge support trendline.

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Feb 03

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Key technical points to consider:

Rising wedgeResistance at 2.9225Support at 2.7805

— Written by Warren Venketas for DailyFX.com

Contact and follow Warren on Twitter: @WVenketas