Natural Gas whipsaws and maintains September rally
|- Natural Gas turn negative this Thursday ahead of the start of the US trading session.
- The US Dollar remain strong, and outpaces all central banks that issued their rate decision this Thursday.
- US Natural Gas prices are in an ascending trend line formation, though pressure builds for a breakdown.
Natural Gas briefly broke the important ascending trend line that should support the September uptrend in gas prices. The earlier headline on Thursday about Pakistan hitting gas markets in search of LNG as its domestic gas production dwindles, makes way for much more easing sentiment.
The US Dollar (USD) gained strength as the US Federal Reserve (Fed) delivered what was expected: a hawkish pause. The devil was in the details in the Dot Plot, in which the Fed is anticipated to hold rates above 5% for the most part of 2024. In the previous forecast, the Dot Plot showed rates between 4.5% and 5%. This surprise jacked up the 2-year US Treasury yield, which peaked at a 16-year high at 5.1973%. The news fuelled a rally in the Greenback.
Natural Gas is trading at $2.95 per MMBtu at the time of writing.
Natural Gas news and market movers
- The Energy Information Administration (EIA) is set to deliver the weekly gas storage changes at 14:30 GMT. Another build is expected from 57 billion to 67 billion.
- China is set to launch new LNG Futures contracts later this year. The proposed sizes per contract will be 20 tons and limits are in place with a maximum of 8% fluctuations from the previous day’s settlement. China is seeking more influence in the gas market by setting Asian gas prices.
- The demand side could be in for a big newcomer to the market as Pakistan sees its local gas production slowing down from 6 billion cubic feet per day to 3.8 billion cubic feet. Local demand is expected to remain unchanged, so Pakistan will need to buy its gas abroad. This means that Pakistan could triple its demand on the market in the coming five years.
- The Norwegian Troll Fields supply is coming back online after repeated and prolonged delays.
- Germany is due to hold tests on Thursday to see if it would be able to make it through the winter in case of gas shortages.
- Headlines suggest that Chevron and the unions are nearing a deal to end local shutdowns in Australia. . Chevron Union workers are expected to follow the recommendations from the Fair Work Commission, the country’s workplace relations tribunal.
Natural Gas Technical Analysis: support holds
Natural Gas appears to be in a bullish triangle with on the top side a triple top at $3.06 on the daily chart. Meanwhile, higher lows are being formed with the green ascending trend line showing support since the beginning of September. Expect to see a breakout above $3.06, which means natural gas prices are set to jump higher.
Awaiting the breakout of the triangle, $3 remains a key level that needs to be broken. Seeing the current equilibrium, a catalyst is needed to move the needle upwards. Gas prices could rally to $3.25 in the bullish triangle breakout, testing the upper band of the ascending trend channel.
On the downside, the ascending trend line at $2.90 should support any attempts to break lower. The 200-day Simple Moving Average (SMA) at $2.80 could act as circuit breaker in case there is a nosedive move. Should that give way on a downside move, some area will be crossed before the next support kicks in at $2.75. This level aligns with the 55-day SMA, which is likely to step in to avoid any nosedive moves in the commodity.
XNG/USD (Daily Chart)
Natural Gas FAQs
What fundamental factors drive the price of Natural Gas?
Supply and demand dynamics are a key factor influencing Natural Gas prices, and are themselves influenced by global economic growth, industrial activity, population growth, production levels, and inventories. The weather impacts Natural Gas prices because more Gas is used during cold winters and hot summers for heating and cooling. Competition from other energy sources impacts prices as consumers may switch to cheaper sources. Geopolitical events are factors as exemplified by the war in Ukraine. Government policies relating to extraction, transportation, and environmental issues also impact prices.
What are the main macroeconomic releases that impact on Natural Gas Prices?
The main economic release influencing Natural Gas prices is the weekly inventory bulletin from the Energy Information Administration (EIA), a US government agency that produces US gas market data. The EIA Gas bulletin usually comes out on Thursday at 14:30 GMT, a day after the EIA publishes its weekly Oil bulletin. Economic data from large consumers of Natural Gas can impact supply and demand, the largest of which include China, Germany and Japan. Natural Gas is primarily priced and traded in US Dollars, thus economic releases impacting the US Dollar are also factors.
How does the US Dollar influence Natural Gas prices?
The US Dollar is the world’s reserve currency and most commodities, including Natural Gas are priced and traded on international markets in US Dollars. As such, the value of the US Dollar is a factor in the price of Natural Gas, because if the Dollar strengthens it means less Dollars are required to buy the same volume of Gas (the price falls), and vice versa if USD strengthens.
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