Jan 11, 2024

US natural gas prices have started the year with a rally from the fourth-quarter slump.


NGAS – Daily Chart 

US NGAS has tested the 3.34 resistance, which marked the top in October and could see further upside with a close above that level. 

Colder weather in the West and attacks on Red Sea shipping routes have spurred a rally in gas prices. That could also have an effect on inflationary forces in Asia. 

The US and UK shot down 18 drones fired by militants from Yemen overnight, stopping one of the most significant attacks since the rebels started targeting container shipping lines in November. The militants have been protesting against Israel’s war in Gaza. 

The US produces more natural gas than it consumes but sells the surplus into global markets. The Red Sea attacks could increase energy prices by making it more expensive to ship liquified natural gas to key regions such as Europe and Asia. 

The US Energy Information Administration agency predicts record highs in natural gas production, domestic consumption, and LNG exports for 2024. These projections highlight the ongoing effects of the shale revolution and the US’s emergence as a top global LNG exporter. 2023 saw a wave of consolidation, with energy giants Exxon and Chevron acquiring shale industry players for upwards of $50 billion each. 

In Asia this week, liquefied natural gas prices fell to the lowest in nearly seven months due to an outlook for milder weather and high inventories. That should limit the effects of higher US prices for Asian countries soon. 

It may also cap US prices by lowering overseas demand, but that will depend on the outlook for Europe’s weather and militant actions in Middle East shipping routes. 

Traders should watch NGAS prices soon as a higher breakout has little resistance above current levels.

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