Abundant Inventory Hinders Price Increase

At the beginning of this month, natural gas prices continued to fall from the $3 mark, with a clear short-term bearish trend. Looking at the weekly chart, natural gas prices are fluctuating at the bottom, with multiple upward attempts failing to form a bullish trend. The global natural gas market is in a fragile state of balance, with limited supply growth but ample inventory; short-term demand is hard to effectively boost, while medium to long-term demand may grow steadily, and the overall outlook for gas prices is positive, but there is little scope for significant action in the short term.

Increasing competition and surging US exports

Previously, Europe's natural gas imports mainly depended on Russia, but now Europe has almost completely cut off Russian gas and is buying all of it (liquefied natural gas) from the United States.

Before 2023, Australia and Qatar had the largest export volumes, but after 2023, the scale of US exports exceeded both countries, becoming the world's largest liquefied natural gas exporter with an export volume of 91.2 million tons. In the first two quarters of 2022, the daily export volume of the United States was as high as 220,000 tons, with a 12% increase in export volume over half a year. In 2023, the export volume of natural gas further rose to 230,000 tons, mainly due to Europe's urgent demand.

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In addition to the European market, another major export region for US natural gas is Asia. In December 2023, natural gas sold to Asia reached 2.29 million tons, accounting for 26.6% of the total. The monthly export volume of the United States to Latin America also reached 500,000 tons, and if this scale continues, in the near future, US natural gas will gradually occupy the entire international main market.

The European energy crisis has not been resolved

Data shows that in 2021, Germany's industrial production consumed more than a quarter of Germany's total energy consumption, with energy-intensive industries such as chemicals, metals, glass, and ceramics accounting for most of the industrial energy consumption, about 77%. Natural gas has always been the most important energy source for Germany, not only used for heating and power generation but also as a raw material for chemicals. With the West's energy embargo on Russia starting in March 2022, European natural gas prices soared, and Germany's energy-intensive supply output sharply declined. Currently, the retail and wholesale prices of natural gas in the EU are three to five times that of the United States, leading to a significant increase in industrial costs.

However, after experiencing the energy crisis, Europe has achieved the goal of reducing the total demand for natural gas by 15% and reaching a storage level of 90%. Even during the winter heating season when demand is high, the overall storage level of the EU is higher than the average level in the past, and the past two winters have been warm. If this year's winter is still relatively warm, then the short-term demand for natural gas may be difficult to boost.

Overall, with a significant increase in supply and ample European inventory, natural gas is difficult to significantly boost in the short term. Technically, natural gas is fluctuating at the bottom of the weekly chart, mainly fluctuating in the range of $1.55-3.15, and the short-term support at the $2 mark is worth paying attention to.