- Natural Gas prices jump to $3.59.
- The US Dollar eases as markets turn towards risk on.
- US Natural Gas prices could reach $4 if further supply hiccups emerge.
Natural Gas prices keep pressing higher as supply towards Europe is getting cut short from all sides. First and foremost the Australian ports are due to close again for strikes as of next Monday, taking out nearly 10% of global LNG production. Next to that, the main Finland gas line towards Europe is closed due to possible sabotage. And Israel has pressed Chevron to halt its gas production seeing the elevated risk in the region, cutting short the supply via Egypte to mainland Europe.
Meanwhile, the US Dollar (USD) pares part of Monday’s gains as the flight to safety eases. Investors were quite quick to assess the situation in Israel and Gaza. Markets were bracing for a possible spillover in the region to the bigger Oil-producing countries, though Saudi Crown Prince Mohammad bin Salman issued a statement late Monday urging both parties to come to the table instead of reverting to violence.
Natural Gas is trading at $3.53 per MMBtu at the time of writing.
Natural Gas news and market movers
- Plans to expand the Nigerian LNG production are at risk of ever taking place as lack of feed-gas supply plays up.
- Finland reports a shutdown on one of its main gas pipelines toward Europe as sabotage has been reported.
- Temperatures in Europe are set to dip by roughly 10 degrees Celsius in the coming two weeks.
- Risk is being factored into Natural Gas price as the situation in Israel and Gaza remains very fragile, with possible spillovers in the broader Middle East region.
- Israel ordered the shutdown of the Tamar gas field run by Chevron Corp., citing safety concerns as fighting between its military forces and Hamas keeps escalating.
- The Israeli government has not informed the Egyptian government of any halt to the Leviathan gas field, one official said.
- Goldman Sachs sees marginal impact from Israel gas production disruption for now, according to a report.
Natural Gas Technical Analysis: Heading to $4
Natural Gas peaks again to a new year-to-date high near $3.6360, with the Relative Strength Index (RSI) in the daily chart reaching overbought levels. Although normally this is a signal that prices should start to ease, do not expect to see a peak yet. Several more headlines are coming in, signalling more supply crunches in the nearby future.
With the firm peak and breakthrough out of the trend channel, it will be crucial that the upper band of that same trend channel acts as support. There aren’t any significant resistance levels except for $3.65, the peak of January 17. From there, the high of 2023 near $4.3080 comes into play.
On the downside, the trend channel needs to act as support near $3.30. In case this breaks down again, Natural gas prices could sink 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 below $3 towards $2.85, near the 55-day Simple Moving Average.
XNG/USD (Daily Chart)
Natural Gas FAQs
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.
