Liquid Natural Gas (LNG) was on a bullish trend until early last year when it topped at around $9.60. But, it made a swift reversal back then and has been on a steep decline for more than a month, with the outlook not looking bright either. Global natural gas demand is set for slow growth in the coming years as turmoil strains an already tight market. High prices and a looming recession lead to downward revision and cast doubt on natural gas prospects in energy transitions.

So, while gas, Oil and energy prices keep increasing for the European and the US consumer, they are declining pretty fast in financial markets. The recent developments have led to a considerable downward revision of gas’s growth prospects. Global gas demand is set to rise by a total of 140 billion cubic meters (bcm) between 2021 and 2025, according to the new Gas Market Report – less than half the amount forecast previously and smaller than the 170 bcm increase seen in 2021 alone.

Natural Gas Monthly Chart – Can the 20 SMA Hold As Support Again?

The reversal down was really steep last month

In late summer last year we saw the beginning of a bullish reversal, which picked up pace during the first several months of this year, as crude Oil prices surged. But, in June we saw a steep reversal and gas fell from the top to $5.33, where it is now facing the 20 SMA (gray) as support on the monthly chart.

The downward revision in gas demand growth in the coming years is mostly the result of weaker economic activity and less switching from coal or oil to gas. Only one-fifth of it comes from efficiency gains and substituting renewables for gas, highlighting the need for greater progress on clean energy transitions. Faster roll-outs of renewable power generation and stronger efforts to use energy more efficiently would ease pressures on energy prices and help price-sensitive emerging markets access gas supplies that can deliver rapid improvements to air quality and carbon intensity.

Natural Gas Weekly Chart – Facing the 50 SMA

The 50 SMA has acted as support before for gas

Yesterday we had another interesting development for gas, as the European parliament classified natural gas and nuclear energy as ‘sustainable’. On the weekly chart, natural gas has retreated lower and is now facing the 50 SMA (yellow), while the stochastic indicator is oversold.