Gas prices fall as prospects of deal with US railways grow

Gas is reducing the recent gains quite strongly, after an agreement has probably been reached with the trade unions of the American railways. It is worth mentioning that over 15% of US coal is transported by rail. The potential railroad strike, which could come as early as Friday, could force generators to burn more gas to produce electricity as about two-thirds of the nation's coal-fired power plants receive their coal by rail. 

The agreement will avoid a situation in which more gas will be used to produce electricity. It is worth remembering that we are still in a period of building up inventories, and these remain well below the 5-year average in the US, amid increased exports to Europe and previously limited production during the pandemic. Today at 4:30 p.m. BST an EIA inventory report will be released, which is expected to bring as much as a 71 bcf increase in gas inventories. Meanwhile, Freeport LNG expects a sharp delay in the restart of its Quintana export plant to November, leaving more gas in the US for utilities to inject into stockpiles for next winter.

In theory, the gas outlook should improve with the start of the heating season. Currently, however, the price erases most of the gains of yesterday's upward movement. Interestingly, a potential head and shoulder pattern is forming on the chart and a break below $ 7.9 / MMBTU will be a key of importance. Moreover, the breakout is rather inconsistent with the medium-term fundamental situation, although it is also worth noting that significant price jumps may occur in the second week of October. Source: xStation5