Bear market seems over, for now
Following Wednesday’s drop to the lowest level since September 2020 at $1.967, which marked the bottom of a three-month-long gas bear market triggered by exceptionally warm winter weather, natural gas has jumped notably. The price of natural gas increased by more than 1% on Thursday as the short-term trend became bullish. During the start of the US session, gas was trading at $2.85.
“Short covering in the futures market has been ramping up since last Friday, providing the gas market with ample buying pressure,” Houston-based energy markets advisory Gelber & Associates said in its daily note on gas futures.
A steady increase in volumes is entering the Freeport LNG facility in Texas, which has been gradually resuming regular operations since a fire in June. This has also been positive for gas bulls.
During seven trading days, the front-month futures contract for the heating fuel has gained 85 cents, or 40%, as of Monday’s closing. Moreover, analysts predict an increase in the US heating demand over the following two weeks as a result of colder-than-normal temperatures in early March.
Mergers and acquisitions
Enbridge Inc said it would acquire a gas storage facility in the US Gulf Coast region for $335 million. This acquisition will be from Brookfield Infrastructure Partners and Crestwood Equity Partners.
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The Tres Palacios gas storage facility supports Texas and Mexico’s gas-fired power generation. This transaction is anticipated to conclude in the second quarter. The pipeline operator also stated that it has chosen to proceed with the $240 million Enbridge Houston Oil Terminal development project.
A clear breakout
In terms of technical analysis, the price has definitely surpassed the previous swing highs in the $2.60 range, confirming the bottom at $2 and beginning to develop positive momentum. The next objective for bulls might be the psychological level of $3, with a potential rally to the previous consolidation zone at $3.50.
Conversely, if bears were to return to the market, $2.60 would serve as support. The price of natural gas might return to $2 if that support is not maintained.
Natural gas futures 1D chart, source: tradingview.com, author’s analysis