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.
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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
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