Natural gas price forecast: Trades near $2.93 as South Pars gas field attack adds uncertainty

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Natural gas price outlook

Highlights

The price is testing the range of $2.90 to $2.93 is still valid after this recent drop.
The RSI is dropping in the mid-20 to low-30, which is a weak reading.
New levels of resistance are forming at $3.03 and $3.08, and stronger support levels are at $2.85.

The current price of natural gas is trading below the recent average, which forms a ceiling that traders watch closely. Sitting near $2.99, the 20-day line marks one point of pressure. Above that, the 50-day line rests close to $3.03. These levels keep prices in check for now.

Beyond that, near $3.07 sits the 100-period EMA, while just above it, $3.08 marks where the 200-period EMA lies. Hitting those zones, price runs into pressure from both EMAs, each one stepping in like a wall. Upward movement stalls because of them, held back each time momentum builds.

Natural gas price dynamics (Source: TradingView)

The market was not able to maintain the momentum by continuing the price action beyond the initial push towards the $3.50 price level. This resulted in the gradual formation of lower highs, and then the price started to decline steadily.

Now, the latest decline in the price level has resulted in the price reverting to the $2.90 level, where the buyers are trying to support the market. The RSI is at the level of 25 to 30, which is the oversold area. This is an indication that the selling pressure is prevailing in the market.

Supply dynamics and seasonal shifts continue to influence natural gas pricing

The prices of natural gas are expected to continue being driven by supply expectations, storage, and demand patterns. As the winter season ends, the focus of the market is slowly shifting towards inventory rebuilding, which has been keeping prices low. This is especially true unless supply problems arise. The U.S. storage levels, as seen in the past, are still higher than the 5-year average, which is another reason why prices are struggling to stay above $3.

Recent events, such as the attacks on key gas facilities in Iran, such as the South Pars and Asaluyeh facilities, have introduced a sense of uncertainty into the supply situation. The South Pars gas field, for example, is responsible for about 20% of the world’s gas reserves, thus being a crucial part of the world’s energy supply. However, since much of the gas produced in Iran is used internally, it is clear why prices are not reacting too badly, despite the attacks on the facilities.

Liquefied natural gas exports still provide balance to the United States. The level of LNG exports continues to operate close to record levels, with exports rising above 14 billion cubic feet per day. This helps to offset the excess supply in the country. In case of a decline in demand for exports, this will cause a surge of supply into the United States.

The level of production still plays a crucial role in natural gas prices. The level of dry gas production in the United States remains high, ranging from 103 to 105 billion cubic feet per day. In case of a decline in demand due to seasonal fluctuations, natural gas prices may still face pressure despite geopolitical risks.

Key levels to watch as consolidation develops

If the price is able to sustain above the $2.90 price level, there is a possibility that the price may move towards the $3.03 and $3.08 price levels. However, in order to change the overall sentiment in favor of the buyers, the price must be able to sustain above the aforementioned price levels.

On the other hand, if the price is able to fall below the $2.85 price level, there is a possibility that the price may fall lower, as the price may be losing its support and may start falling.

In our last analysis, we had seen that the $3 mark had started acting as a short-term base for the prices, as the prices were not able to go past $3.50 in the last rally. Now, as the prices are going past this mark, it seems that the structure has weakened, and the prices are testing whether a new base is being formed or not.

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