Natural Gas off session's low to close in the red for this week
|- Natural Gas makes new weekly low as stockpile data points to less demand for the winter.
- The US Dollar takes a step back with markets digesting the hawkish tone of the Fed.
- The overall technical picture remains a longer-term ascending trend channel.
Natural Gas drops lower this Friday to find support and rebound a touch, though not enough to avoid a weekly loss. Stockpile numbers are dampening any hopes for a speedy recovery of the Natural Gas price toward $3. With stockpiles in Germany above 90% and US stockpiles ticking up again this week, the demand toward the fall could be less present than in past years.
Although the US Dollar took a step back on Thursday when the US issued surprise tariffs on tin metal imports from China, Germany and Canada. The Greenback remains in the green for this week and consolidates its fresh monthly high. This weighs in the futures market on the contracts as the current price gets capped by a more expensive Greenback.
At the time of writing, Natural Gas is trading at $2.688 per MMBtu.
Natural Gas news and market movers
- European gas storage is ahead of its projected target for October and is already above 90% stockpile.
- As the summer season comes to an end, the overall demand for energy commodities is nearing the end of the summer cycle as flying demand will start to fade as well.
- The weekly US gas stockpile numbers on Thursday revealed a build from 29B to 35B, while 34B was expected.
- Pipeline gas cuts from Kazakhstan and Uzbekistan could provide some upside push to LNG demand.
- Current weather projections point to an elevated possibility of a cold winter in Europe, which would underpin current gas price levels even as storages are already almost full.
- China’s LNG import growth is set to slow down for the winter, according to Bloomberg gas analyst Daniela Li. China has secured 37 long-term deals in the past two years, which could lead to oversupply by 2024.
- Tropical storm Hilary is on its way to the Baja California peninsula and is set to make landfall by Friday evening.
- All eyes are focused on next week where the annual Jackson Hole Symposium will be the focal point for the week. Each year the US Federal Reserve signals a change in its monetary policy going forward on the event.
Natural Gas Technical Analysis: no hopes for recovery
Natural Gas has received a beating these past few trading days while price action has tested the 55-day Simple Moving Average (SMA) near 2.647 earlier this Friday. With an overall 8% decline, it becomes clear that the equilibrium between supply and demand is very fragile and the current rise in gas stockpiles for the US, EU and China could point to fading demand over the winter. For now more downside pressure looks to be at hand, unless current supply gets reduced should the Australian strikes broaden and fully shut down supply toward their external trade partners.
On the upside, $3 is still the level to watch as the overall ascending trend channel since April is being respected. Should Natural Gas prices recover, look for a close above $2.935, the high of Tuesday, in order to confirm that demand is picking up again. More upside toward $3 and $3.065 (high of August 9) would be targets or levels to watch.
On the downside, the trend channel is doing its work with a 55-day Simple Moving Average (SMA) at $2.639, which is underpinning the price. In case more downside pressure builds, look for $2.579, which is the lower trendline of the trend channel.
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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