- Natural Gas prices sink over 10% for the week.
- The US Dollar briefly surges on the back of hawkish Powell comments.
- Natural Gas prices could sink lower as temperatures in Europe remain on the high end of the range.
Natural Gas is set to close this week at its lowest level in over a month, after prices are falling more than 10% since the opening on Monday as concerns over supply following the Middle-East war are fading quickly. Markets have been following the narrative that the longer the tensions linger in the Middle East, the less probable it becomes that a proxy war would get underway.
Meanwhile, the US Dollar (USD) is flat on Friday after its overnight stronger performance on the back of comments from US Federal Reserve Chairman Jerome Powell. Powell went against earlier comments from a few Fed members that the central bank has reached the end of its hiking cycle. Although the US Dollar Index (DXY) trades in the green, this week's gains are far from enough to erase losses from the prior one.
Natural Gas is trading at $3.22 per MMBtu at the time of writing.
Natural Gas market movers: Flat for Friday
- Uganda Energy Minister Ruth Nankabirwa said the country signed a bilateral agreement with Tanzania for the construction of a natural gas import pipeline.
- The Pentagon has issued a statement on its military personnel in Syria and Iraq that came under attack four times since an overnight US airstrike on an arms depot.
- Turkey’s President Recep Tayyip Erdogan has urged Israel to free detained Palestinians in order to secure the release of civilian hostages held by Hamas.
- Around 18:00 GMT, the weekly Baker Hughes Gas Rig count will come out. Previous was at 118, posting a small uptick from the week before.
Natural Gas Technical Analysis: Awaiting further storage buildup
Natural Gas price has given back a substantial part of its uprising since the start of the Israeli-Palestinian war a few weeks ago. The risk premium has been all but erased by now. While Europe is facing elevated temperatures and with gas storages still fully filled up for the winter, more downturn should be priced into Natural Gas prices.
Only one big catalyst could break the price ceiling near $3.64, and that is a proxy war in the Middle East. A risk premium would be priced in if Iran, Saudi Arabia and other countries in the region started mobilising forces. In such a case, a quick sprint to $4.33, the high of 2023, would be expected.
On the downside, the 55-day Simple Moving Average (SMA) is doing its work near $3.15 as the downturn appears to be losing traction near $3.20. In case it is unable to hold the recent sell-off, expect to sell the orange line, from the double top in August, to try and salvage the situation near $3.06. That will be the last line of defence before gas prices retreat below $3.
-638352077594712475.png)
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.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD extends recovery beyond 1.0400 amid Wall Street's turnaround
EUR/USD extends its recovery beyond 1.0400, helped by the better performance of Wall Street and softer-than-anticipated United States PCE inflation. Profit-taking ahead of the winter holidays also takes its toll.
GBP/USD nears 1.2600 on renewed USD weakness
GBP/USD extends its rebound from multi-month lows and approaches 1.2600. The US Dollar stays on the back foot after softer-than-expected PCE inflation data, helping the pair edge higher. Nevertheless, GBP/USD remains on track to end the week in negative territory.
Gold rises above $2,620 as US yields edge lower
Gold extends its daily rebound and trades above $2,620 on Friday. The benchmark 10-year US Treasury bond yield declines toward 4.5% following the PCE inflation data for November, helping XAU/USD stretch higher in the American session.
Bitcoin crashes to $96,000, altcoins bleed: Top trades for sidelined buyers
Bitcoin (BTC) slipped under the $100,000 milestone and touched the $96,000 level briefly on Friday, a sharp decline that has also hit hard prices of other altcoins and particularly meme coins.
Bank of England stays on hold, but a dovish front is building
Bank of England rates were maintained at 4.75% today, in line with expectations. However, the 6-3 vote split sent a moderately dovish signal to markets, prompting some dovish repricing and a weaker pound. We remain more dovish than market pricing for 2025.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.