- Natural Gas prices failed to break above $1.90 this week.
- Traders throw in the towel on bullish outlook after European PMI data points to a subdued economic outlook.
- The Dollar Index has risen strongly and the markets have not bought the Fed's soft landing story.
He Natural Gas (XNG/USD) It is trading practically flat on Friday and is set to close the week with a small gain on the US side. However, on the other side of the Atlantic, the European Gas market will close the week in the red, as high reserves and the lackluster economic outlook in Germany push Gas demand even further down.
Meanwhile, the DXY US Dollar Index, which measures the US Dollar (USD) against a basket of six foreign currencies, is breaking above 104.00 on Friday. The fact that China has taken a step back in its recovery, coupled with the markets not believing in the Fed's three rate cuts by 2024, is creating a cocktail in which the Dollar is winning twice. Investors see no reason for three rate cuts and a soft landing by the Fed because recent US economic figures continue to show the economy taking off, not landing, calling into question the need for any rate cuts. .
At the time of writing these lines, Natural Gas was trading at $1.87 per MMBtu.
News about Natural Gas: No risk of ceasefire
- The UN holds a summit on Friday to discuss a forced ceasefire in Gaza. This could trigger further downside risk for Natural Gas in the event of a ceasefire.
- Meanwhile, at that same meeting, both China and Russia have opposed the US proposal.
- Russian Liquefied Petroleum Gas prices are soaring as a result of Ukrainian drone attacks on several storage facilities.
- India has refused to receive oil from Russia to comply with US sanctions, Bloomberg reported on Wednesday. The domino effect could also extend to Gas deliveries, which would mean a compression of prices in the region if Russian Gas were rejected.
Technical analysis of Natural Gas: The pressure continues
Natural Gas prices continue to consolidate with a pennant formation on the daily chart, made up of lower highs and higher lows since mid-February. With buyers and sellers pushing each other, a breakout could happen at any time. Given the weak energy demand in Europe, with its storage units still above average, a downward turn seems more likely than an upward breakout.
On the bullish side, we must first recover the key level of $2.00. The next key mark is the historical pivot at $2.12, which is broadly consistent with the 55-day SMA at $2.04. If Gas prices rise in that area, a wide area opens with the first stop at the red descending trend line near $2.27.
To the downside, multi-year lows remain close, with $1.65 as the first line in the sand. Also keep an eye on this year's low at $1.60. Once a new yearly low is recorded, traders should look to $1.53 as the next support zone.
Natural Gas: Daily Chart
Frequently asked questions about Natural Gas
What fundamental factors determine the price of Natural Gas?
The dynamics of supply and demand is a key factor that influences Natural Gas prices, and is in turn influenced by global economic growth, industrial activity, population growth, production levels and inventories. Climate influences Natural Gas prices because more Gas is used during cold winters and hot summers for heating and cooling. Competition from other energy sources influences prices as consumers may opt for cheaper sources. Geopolitical events, such as the war in Ukraine, also play a role. Government policies related to extraction, transportation and environmental issues also influence prices.
What are the main macroeconomic publications that influence Natural Gas Prices?
The main economic publication that influences Natural Gas prices is the weekly inventory bulletin of the Energy Information Administration (EIA), a US government agency that produces data on the gas market in the United States. The EIA Gas bulletin usually comes out on Thursday at 14:30 GMT, the day after the EIA publishes its weekly Oil bulletin. The economic data of the large consumers of Natural Gas can influence supply and demand, among which China, Germany and Japan stand out. Natural gas is primarily priced and traded in US dollars, so economic releases affecting the US dollar are also factors.
How does the dollar influence Natural Gas prices?
The US dollar is the world's reserve currency and most commodities, including Natural Gas, are quoted and traded in international markets in US dollars. Therefore, the value of the Dollar influences the price of Natural Gas, since if the Dollar strengthens, fewer dollars are needed to buy the same volume of gas (the price falls), and vice versa if the dollar strengthens.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
