Natural Gas retreats off the high as ceasefire talks reportedly progress rapidly

• Natural Gas prices retreat from $3.70 as tension builds around possible invasion in Gaza region.
• The US Dollar reclaims its status as King Dollar as US yields flirt with 5% again. 
• Natural Gas prices could jump rapidly once reports are issued that Israel has started its ground offensive. 

Natural Gas is retreating a touch as reports hit the wires that a ceasefire deal is in progress, after pushing higher earlier as Israel confirms it has made a second entry across the Gaza border. Overnight US Pentagon officials confirmed that US soldiers have been attacked 12 times in Iraq and 4 times in Syria in the past week by Iran-affiliated groups. With tensions reaching a new high, gas prices are trading alongside that elevation. 

Meanwhile, the US Dollar (USD) is set to lock in a new week of gains after a small negative dip last week. Although the topside looks to remain locked for further upside in the US Dollar Index (DXY), expect to see the Greenback trade at elevated levels ahead of the Federal Reserve decision next week. The Personal Consumption Expenditures – Price Index results out on Friday, will shed a bit more light on how inflation is still declining or soaring again in the US. 

Natural Gas is trading at $3.69 per MMBtu at the time of writing.  

Natural Gas news and market movers

• At the US opening bell reports and headlines are coming out that a ceasefire deal is in the making in the Middle East. 
• European and US gas prices soar substantially as an Israeli invasion in the Gaza region over the weekend could materialize.
• European natural gas prices soared near €50 a megawatt-hour as traders are on the lookout for further news on tensions in the Middle East. The risk premium to be factored in for a proxy war in the region means a substantially elevated gas price.
• Despite the recent drops in temperatures, EU gas storages remain near 99% full.
• EDP has plans to convert Abono II in Spain from a coal to a gas-fired power plant. The conversion should be done by mid 2025.
• Russian gas  still accounts for about 10% of France’s natural gas supply, French Energy Transition Minister Agnes Pannier-Runacher said.
• This evening at 17:00 GMT the weekly Baker Hughes Gas Rig Count is due to come out. Previously it was at 118 and is still at the lower levels of 2023.

Natural Gas Technical Analysis: Ceasefire just a soft patch

Natural Gas price has met its first big price target at $3.65 after a steep ascent in the past few days. Day by day more headlines come out that are pointing to a major Israeli ground assault going ahead into Gaza at any moment. Once that news hits the wires, expect to see another firm jump higher that could even print a new high for 2023 near $4.33

From a purely technical perspective, gas prices broke back above the topside trend line identified earlier, near $3.37, on Wednesday. Expect to see a continuation higher from here with the next level on the upside at $3.63. Should a big ground invasion take place and several countries start to choose sides, expect a very quick squeeze higher to $4.33, the high of 2023.

On the downside, the trend channel should try to act as support again, near $3.37. Natural Gas prices could fall to $3.07, with that orange line identified from the double top around mid-August. Should the drop become a broader sell-off, prices could sink to $3.03, at the 55-day Simple Moving Average.

XNG/USD (Daily Chart)