Natural Gas (XNG/USD) is unable to flip in profit after being off this Monday’s low at the start of the US trading session, with the weather man as the biggest catalyst for this steep decline on this occasion. A warm front is set to kick in in Europe. Temperatures are forecast to top 17 degrees Celsius in Paris for example, which is exceptional for this time of year. For 2024, this puts the Gas reserves in Europe at a very good position ahead of the next heating season with less need to acquire supply during the coming six months.
The US Dollar (USD) is facing some pressure from all angles. Geopolitical tensions are present, favouring the Greenback on the one hand. While on the other hand traders are looking forward to the US Consumer Price Index (CPI) on Tuesday with US inflation expected to continue its disinflationary pathway lower, which advocates for a bit weaker US Dollar.
Natural Gas is trading at $1.86 per MMBtu at the time of writing.
Natural Gas is facing a more substantial downturn. Traders fear Biden’s current Gas-exporting moratorium could be lifted, leading to an influx of Natural Gas supply flooding markets. Set against demand which is expected to remain low, such an influx would tip the price lower.
On the upside, Natural Gas is facing some pivotal technical levels to get back to. First, $1.99 which saw an accelerated decline. Next is the blue line at $2.13 with the triple bottoms from 2023. In case Natural Gas sees sudden demand pick up, possibly $2.40 could come into play.
Keep an eye on $1.80, which was a pivotal level back in July 2020. Should Biden’s moratorium be lifted, together with the additional supply from Canada which is exporting more to fill the gap from the US, $1.64 and $1.53 (low of 2020) are targets to look out for too.
XNG/USD (Daily Chart)
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.
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.
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.