NG prices have been growing at NYSE since April. In 5 days the May futures appreciated 18 cents. Some investors say the major downtrend, which made NG prices go down to the 10-year low, is nearly over.
First, let’s have a look at the market changes that took place in March-April.
Spring Thaw
According to , in early March natural gas prices hit the top around $2,586-2,690 and started going down. The prices kept going down till March 12th as the USA was engaged in propaganda against Iran. By that time the prices had declined down to $ 2,389-2,418.
However, the BRICS announced their quest for new trade areas while investors were worried that the existing “steams” would find new customers. This contributed to the price consolidation within the 2,389-2,463 range.
Since March 20th, the bears took over the initiative once again. In April natural gas price declined by 27 cents down to $1,900-1,952.
The uptrend started on April 19th looks rather interesting. On April 25th it reached $2,078. The major reason for that was the temporary closure of the “North Stream” (repair work).
According to the Commodity Trading Department of , natural gas prices are currently being pressed by record-high reserves. The temperature is still above the 30-year average. The mid-term forecast is bearish.
As of March 23rd, NG stocks were equal to 2,437 Bcf, or 57 Mcf more than a week before, 816 Mcf more than a year ago and 900 Mcf more than the 5-year average 1,537 Bcf.
What factors support and press NG prices?
Judging by all the above-mentioned, we can trace the following tendency: mid- and long-term factors keep pressing the prices while short-term factors are supporting them.
If to consider the time period given above, gas prices were supported by the following factors:
· substantial US reserves (over 70M m3)
· growing domestic production by key natural-gas consumers. For example, during the first 3 months of 2012 Ukraine increased the production of natural gas by 1.3% up to 5.1B m3.
· an increase in the transit of natural gas in Europe via Ukraine.
· introduction of energy-saving technologies, especially in North America
The following factors were pushing the prices up:
· the mentioned closure of the “North Stream” (repair works)
· unstable US Dollar
· Germany (and some other EU countries) decided to abandon nuclear energy, consequently increasing the demand for natural gas and other energy sources.
· China’s decision to increase the import of NG from Middle Asia by 500%.
Forecast:
In the short run, the bearish tendency is expected to stay. The Russian factor will probably play the key role. If to consider the seasonal factor, the first part of May will bring another decline in the market of natural gas. This is the time when NG prices usually reach the bottom.
Moreover, higher production in numerous countries around the globe will also contribute to the downtrend. For now, there is only one factor that can cause a major price hike in the global energy carriers. We mean any major depreciation of the US Dollar.
Market Leader and would appreciate if you could participate in a survey. Please, visit the Academy’s forum for traders and investors and answer the following question:
What is your short-term outlook for NG prices?
