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LNG outage at the gas station puts pressure on prices in the United States and supports prices in the European Union -by Ecork

Natural Gas, LNG, US Exports, Europe, Hurricane Season – Talking Points

  • US natural gas prices have fallen Henry Hub due to reduced US export capacity
  • A Texas LNG facility could take months to reconnect after an explosion
  • AUD/USD is approaching a critical resistance point near the May low

US natural gas prices fell overnight as traders digested the news of a damaged LNG terminal outside Texas. The Quintana Island facility near Houston suffered a catastrophic explosion last week, an event that would drastically reduce the ability to export liquefied natural gas in the United States. Henry Hub price for the current month is down 16.49% after terminal operator Freeport LNG said it could take months to complete repairs.

European gas prices rose on the news, highlighting the importance of US energy imports to the 27-nation European Union bloc. The European Union began importing as much natural gas as possible in the wake of the Russian invasion of Ukraine, which imposed sanctions on Moscow and its energy products. The news presents a major hurdle as the EU attempts to increase storage levels ahead of the winter months when cold temperatures increase energy needs.

There is also an increased risk ahead of further disruptions to US LNG export capacity. The Atlantic hurricane season begins on June 1. Previously, major hurricanes, at times severely, affected the ability to export LNG and other energy products. Furthermore, the US National Oceanic Atmospheric Administration (NOAA) is forecasting a 2022 hurricane season “above normal,” with 6 to 10 hurricanes likely, 3 to 6 likely to become major hurricanes.

An adverse event at an export terminal is likely to further hamper export capacity, which could put pressure on US prices but raise European prices. The downward movement in US prices is particularly impressive, since it occurs during the Great Heat Wave in the US, an event that usually causes prices to rise. It talks about the huge impact that exports have on the US market. The Texas LNG facility can process more than two billion cubic feet per day. 2 billion cubic feet per day is now contained in the US domestic market at the moment, which will help keep prices low.

Technical outlook for natural gas

Prices fell to trendline support before rising modestly this morning. The 50 day simple moving average was easily omitted during the overnight move. The Relative Strength Index (RSI) has crossed below its midpoint, while the MACD tracks to do the same. A fall below trend line support will open a path for prices to test the support level dating back to the October 2021 swing high. The 100 day simple moving average is below this support level.

natural gas daily chart

The graph was created using TradingView

— By Thomas Westwater, Analyst for DailyFX.com

To contact Thomas, use the comments section below or Tweet embed on Twitter

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