Natural Gas dips with Europe's demand becoming sluggish on a drop in temperatures

Natural Gas dips at the start of the US trading session.
Traders see cooler temperatures in Europe limit demand in the region.
The US Dollar index trades flat above 105.00 and looks for direction after a boring Powell speech.

Natural Gas price (XNG/USD) is easing again, down less than 1% on Wednesday, with Europe facing cooler temperatures in the coming weeks, curbing demand for Gas. The more than ten-day correction finally snapped after Natural Gas reached a pivotal level at $2.29 and has been afloat since then. Traders are on the lookout for any news from the Freeport production plant in the US after storm Beryl forced to reduce production sharply to only 20%, creating uncertainty about Gas deliveries for Europe and other parts of the world.

Meanwhile, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, is also having some issues. US Federal Reserve (Fed) Chairman Jerome Powell was unable to deliver anything new in his semi-annual testimony before the US Congress. Traders are facing boredom in hearing the same repeated message again that it is too early to cut interest rates.

Natural Gas is trading at $2.35 per MMBtu at the time of writing.

Natural Gas news and market movers: Supply remains key

Shell, TotalEnergies, BP and Mitsui are each set to take a 10% stake the Ruwais LNG plant, a project from the Abu Dhabi National Oil Company, set to come online in 2028, Bloomberg reports.
Traders are looking for clues about whether the Freeport plant in Texas can reopen back in full after it had to reduce production due to storm Beryl passing in the region, according to Reuters.
China demand might remain curbed at current Gas prices, with Chinese traders only interested in buying contracts below $2.00, according to Bloomberg.
Newsbase reports that the US Treasury Department has extended authorization to export and re-export Liquefied Petroleum Gas (LPG) to Venezuela until July 8, 2025.

Natural Gas Technical Analysis: Not that easy

Natural Gas price has bounced right off the support level FXStreet mentioned in previous articles at $2.29 on Monday, with the 100-day Simple Moving Average (SMA) alongside the green ascending trend line in the chart below as support. The bounce, though, is not really playing out as Gas prices are rather going sideways. Markets will await a catalyst to either retest that support again or send Gas prices higher.

The 200-day SMA is the first force to reckon with on the upside, near $2.51, closely followed by the 55-day SMA at $2.62. Once back above, the pivotal level near $3.08 (March 6, 2023, high) remains key resistance after its false break last week.

On the other hand, the support level, which could mean some buying opportunities, is $2.29, the 100-day SMA that falls in line with the ascending trend line since mid-February. In case that level does not hold as support, look for the pivotal level near $2.13, which has acted as a cap and floor in the past.

Natural Gas: 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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