Natural Gas trades on the front foot, with market activity picking up interest

●Natural Gas prices are steady, holding on to a three-day winning streak. 

●Traders see Asian buyers crowding the demand side in the European gas markets. 

●The US Dollar Index sinks below 104.00 ahead of US PCE inflation numbers.

Natural Gas (XNG/USD) trades on the front foot on Thursday driven by a pickup in activity and demand, showing how resilient the commodity actually can be. First and foremost, TotalEnergies signed a deal with Singapore’s Sembcorp for a whopping 16-year commitment for sale and purchase of Liquefied Natural Gas (LNG). This adds to the headlines from Wednesday, which pointed to  more and more Asian traders looking to profit from the cheaper Gas contracts in the European market.

Meanwhile, the US Dollar (USD) is facing a pivotal moment this Thursday with the US Personal Consumption Expenditures (PCE) Price Index data to be released later. After the hot inflation report from two weeks ago, markets are already pricing in that interest rates in the US will remain at the current levels for longer than previously expected. Some traders are even considering the possibility of a surprise rate hike from the Federal Reserve. In this context, the question is whether the US Dollar can still rally despite these already supportive elements.

Natural Gas is trading at $1.92 per MMBtu at the time of writing. 

Natural Gas market movers: Equilibrium in Europe becomes fragile

●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: European Gas market could see balance shift

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)