Natural Gas price 8% higher after EIA data, weak US Dollar, Norwegian outages

• Natural Gas surges, piercing right through the 100-day SMA on a mixture of falling inventories and a weaker US Dollar.
• EIA data shows a substantial below-expectations drop in Gas storage, suggesting dermand outweighs supply. 
• ECB executes a hawkish hike, revising up core inflation forecasts, boosting the Euro and weighing on USD.
• Gas market demand bubble and supply headwinds after outages in Norway further underpin the commodity. 

Natural Gas price surges higher on Thursday supported by lower-than-expected Natural Gas Storage Change data from the Energy Information Administration (EIA) and a weaker US Dollar following the European Central Bank (ECB) interest rate decision. The weekly EIA data showed a lower-than-expected 84B cubic feet of Gas in storage in the week ending June 9, indicating demand outweighed supply. 

Early on Thursday, Natural Gas rose after the ECB raised interest rates by 0.25%, as expected, and revised up its core inflation forecasts, thus paving the way for hikes in the future. This strengthened the Euro and led to a steep decline in the US Dollar Index (DXY), buttressing Natural Gas which is mainly priced and traded in USD.  

XNG/USD saw further gains after a market heavily commited to the short side was caught in a short squeeze by the news that outages at the Nyhamna Gas processing plant in Norway. 

At the time of writing, Natural Gas is trading over 9% higher on the day at $2.594 MMBtu.  

Natural Gas news and market movers 

• Natural Gas rises strongly on the back of lower-than-expected Natural Gas storage data from the week ending June 9 and a weaker US Dollar. The EIA inventory data showed a fall to 84B cubic feet when a lesser decline to 95B had been expected from 104B in the previous week. The data suggests demand outweighs supply. 
• News of a technical issue at the Nyhamna Gas processing plant in Norway brought into doubt confidence in Norwegian supply. News that the maintenance issue would require over a month to resolve, during which time the plant would be outed, was a further negative for supply. 
• The Commitment of Traders (COT) report from the CFTC for the previous week showed Natural Gas traders were heavily short the commodity, laying the foundation for a short squeze higher on the Nyhamna news. 
• Natural Gas rose following the ECB meeting and decision to increase all three of its key interest rates by 0.25%, to 4.00%, 4.25% and 3.50% for the main refinancing, marginal lending and deposit facilities respectively. 
• More importantly the ECB revised up its forecasts for core inflation in 2023-4. 
• This will probably lead to higher interest rates in the future and contrasts with the US Federal Reserve’s relatively less hawkish outlook.  
• A key phrase in the ECB’s monetary policy statement was, “The Governing Council’s future decisions will ensure that the key ECB interest rates will be brought to levels sufficiently restrictive to achieve a timely return of inflation to the 2% medium-term target and will be kept at those levels for as long as necessary."
• That said, the ECB also revised down growth estimates for 2023-4 – a dovish sign. 
• In her press conference after the decision, ECB President Lagarde left the door open to more hikes in the future, said the labor market was 'on fire', that inflation would probably remain sticky for some time and the ECB still had more work to do.
• Natural Gas price is further underpinned by a mixture of increased Asian demand, forecasts of hotter weather, Russian pipeline disruptions and Norwegian outages. 

Natural Gas Technical Analysis: Recovering within a longer-term downtrend

Natural Gas price is in a long-term downtrend after turning lower from its peak of $9.960 MMBtu achieved in August 2022. It continues to make lower lows, though bearish momentum has tapered off considerably since February 2023, as evidenced by the bullish convergence of the Relative Strength Index (RSI) momentum indicator since May. A bullish convergence occurs when price makes new lows but RSI fails to. It can indicate a propensity for price to rebound. 

Nevertheless, unless Natural Gas can break above the last lower high of the long-term downtrend at $3.079 MMBtu, the odds continue to favor the bear trend, and shorts over longs. 

A break below the $2.110 MMBtu year-to-date lows would solidify the bearish outlook and suggest a continuation down to a target at $1.546 MMBtu, the 61.8% Fibonacci extension of the height of the roughly sideways consolidation range that has unfolded during 2023. 

Natural Gas: Weekly Chart

Scoping into the daily chart, it can be seen that price has broken above the 50-day Simple Moving Average (SMA). It is now looking like price may make a decisive break above the 100-day SMA by the end of the day, soldifying the short-term bullish bias. Decisive bullish breaks are characterized by a break through a level by a longer-than-average green daily candle, which closes near to its high or three green daily candles in a row. 

Natural Gas: Daily Chart

Looking at the 4-hour chart, the current decisive break happening above the May 31 high of $2.433 MMBtu, is a bullish sign that suggests a continuation higher is likely in the short term, assuming the bullish break holds, and the current 4-hour period closes near to its high. 

Natural Gas: 4-hour Chart

This falls in line with the bullish RSI convergence observed on the weekly chart. On the 4-hour chart, meanwhile, the RSI is tracking price higher, peaking in the short term with price. This keeps the torch burning for bulls and indicates the possibility of higher prices to come, particularly in the near term.