Natural gas price hangs in a balance as it nears make or break level

Natural gas price has gotten a rude wake-up call in the past few days as the recent momentum faded. After almost doubling to $3.65 in October last year, the price has crashed to $2 as the old concerns about demand and supply continues. It remains 77% below its highest point in 2022 when Russia invaded Ukraine.

The main concern among investors is that the US has become a major player in the natural gas in the past few years. Data published this month revealed that the country recently passed Australia and Qatar to become the biggest exporter of Liquified Natural Gas (LNG) globally.

This trend could continue as the US is still building infrastructure to ship gas abroad. For example, according to IEA, several gas pipelines with a capacity of 20 billion cubic feet per day (Bcf/d) is being constructed. Qatar is also investing in LNG as it seeks to boost its sales to Europe.

These pipelines will deliver their natural gas to export terminals that are being constructed in Texas and Louisiana. The pipelines and terminals will come online at a time when there are concerns about supply because Russia is also selling its gas to Asian countries. 

In its most recent report, the Energy Information Administration said that it expects supply will jump by 1 billion Bcf/d this year while demand will rise by almost 2Bcf.

Still, there are concerns about the impact of the ongoing crisis at the Red Sea. The most recent statement came from Qatar, which said that it would delay LNG shipments to Europe as the crisis continues. While this is a major move, analysts note that demand from the region is easing while most countries have enough gas in their storage.

The ongoing retreat of natural gas prices has harmed ETFs that track the commodity. For example, the ProShares Ultra Bloomberg Natural Gas ETF (BOIL) has crashed by over 14% in the past month. Similarly, the United States Natural Gas ETF (UNG) tumbled from the YTD high of $26 to $20.

Technically, as shown above, natural gas prices are trading at a vital level. On the weekly chart, we see that it is approaching the crucial support at $2.07, its lowest point in April last year. A break below that point will signal that there are more sellers in the market and push it below $2.