European natural gas futures rebounded on Tuesday after approaching technical levels that signal the contracts have been oversold, according to Bloomberg.
Benchmark front-month Dutch gas added as much as 2.6% after slumping to the lowest level since July on Monday. Lower prices may help demand recover after it has been bruised by the energy crisis in recent years.
For now, the market remains well supplied and the latest weather forecasts suggest there’s unlikely to be a cold snap during the next month. That will help keep more fuel in storage sites and ease pressure to refill over the summer.
Oversold levels signal to some traders that a technical rebound in contracts is imminent. A relative strength index reading above 70 indicates a security may be poised to fall and below 30 it may be set for an increase.
Gas demand in the European Union and the UK will begin to improve later this year, consultancy Independent Commodity Intelligence Services said. That’s set to spur a 15% increase in imports of liquefied natural gas in 2024.
“Limited growth in pipeline supply will place the burden on LNG to meet the projected increase in gas consumption,” ICIS analysts led by Tom Marzec-Manser, said in their outlook. Still, a full recovery in gas demand to pre-crisis levels is not expected this year, as “European fuel costs remain too high relative to other regions” for some.
Dutch month-ahead gas traded 2.5% higher at €26.37 a megawatt-hour by 9:33 a.m. in Amsterdam. The contract lost 5.2% the previous day.