- Natural Gas prices are recovering again ahead of the US Opening Bell
- European inflation numbers point to more downturn and European economy slowing down.
- The US Dollar Index trades around 104 ahead of the US opening bell.
Natural Gas (XNG/USD) is back in the green with buyers that came in and bought the dip that took place ahead of the US data release. The earlier downturn came with recent inflation numbers out of Europe where disinflation is ongoing, though is starting to show signs of a slowing down economy. That would mean quite some substantial demand not coming back online anytime soon in Europe with Industrial Production remaining tepid for now in Europe.
Meanwhile, the US Dollar (USD) is unable to move away from a key level at 104.00 in the US Dollar Index. The Personal Consumption Expenditures numbers fell in line and are showing that the disinflation path for the US is still in tact. Though the muted market reaction points to traders keeping their powder dry for the central bank meetings in March.
Natural Gas is trading at $1.92 per MMBtu at the time of writing.
Natural Gas market movers: Save the day
- LNG flows into Europe have been 16% higher than the 30-day average these past few days, according to Bloomberg.
- European gas storages are still filled up to nearly 63% as the heating season in the old continent comes to an end.
- Freeport LNG in Texas has reported that it will need to extend its production of LNG another two weeks after issues with its Train 3 unit.
- At 15:30 GMT, the weekly Natural Gas Storage Change will be released by the Energy Information Administration. The previous number was a draw of 60 Billion cubic feet, with expectations for a larger draw of 88 Billion cubic feet for this week.
Natural Gas Technical Analysis: Scooping up bargains in European gas market
Natural Gas prices are already pricing in the fact that more Asian trading desks and companies are trying to set foot in Europe to get their hands on substantially cheaper Gas contracts. Meanwhile, the European supply out of the US could be at risk as deliveries to Asia become more beneficial for US sellers, with Asian handlers willing to pay more for US gas than Europe is at the moment. This could soon see the scale tipping into less supply. Combined with an overcrowded demand, this could mean Gas prices soaring further above $2.
On the upside, Natural Gas is facing some pivotal technical levels to get back to. The next step is $1.99, – the level which, when broken on the way down, saw an accelerated decline. After that, the green line at $2.13 comes into view, with the triple bottoms from 2023. If Natural Gas sees a sudden demand pickup, $2.40 could come into play.
On the downside, $1.64 and $1.53 (the low of 2020) are targets to look out for. Another leg lower could come if global growth starts to falter and there is less demand. Adding to that equation, more volume of Natural Gas from the US and Canada could quickly tip into an oversupplied market with more downside prices at hand.
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 holds higher ground above 1.0800 ahead of US payrolls
EUR/USD is holding higher ground above 1.0800 in the European session on Friday. The pair extends its week-long winning streak amid a broad US Dollar weakness and an upbeat market mood. The further upside hinges on the US Nonfarm Payrolls data release.
GBP/USD rises toward 1.2800 after a landslide Labour victory
GBP/USD extends gains toward 1.2800 in the European session on Friday. The Pound Sterling is underpinned by the landslide Labour Party victory in the UK general election while the US Dollar awaits the Nonfarm Payrolls data for fresh directives.
Gold continues positive run as investors foresee lower interest rates
Gold rises on Friday, continuing its run of positive days as investors become increasingly optimistic the Fed will lower interest rates sooner than previously thought, and the US Dollar softens, adding a lift to Gold which is predominantly bought and sold in Dollars.
Bitcoin falls below $56,000 level
BTC breached the weekly support level of $58,375 on Thursday; as of Friday, it is trading 2.8% lower at $55,314. ETH and XRP have dropped below crucial support thresholds.
Nonfarm Payrolls forecast to grow by 190K in June as Fed ponders rate-cut timing
With US Federal Reserve Chairman Jerome Powell’s Sintra appearance out of the way, all eyes now remain on top-tier Nonfarm Payrolls data for June, due on Friday at 12:30 GMT.