Natural Gas retreats as geopolitical tensions ease

Source Fxstreet
Apr 22, 2024 10:46
  • Natural Gas price retreats on Monday on Iran’s communication. 
  • Iran'S foreign ministry said nuclear weapons have no place in Iran’s nuclear doctrine.
  • The US Dollar Index eases with markets favoring risk assets over safe havens and cash. 

Natural Gas (XNG/USD) retreats from its last week’s peaks near $2.03 after tensions were nearly spill over between Israel and Iran in a direct confrontation. However, the retaliation from Israel on Iran was mild, which already offered markets a sigh of relief on Friday when US equities almost erased an earlier 2% decline before the US opening bell. With new easing communication from Iran on Monday, investors are heading back into equities with the idea that any further escalation will not be at hand any time soon. 

Meanwhile, the US Dollar Index (DXY) is weakening on outflows out of safe havens into risk assets. Apart from geopolitics, important US macro data may influence the Greenback’s valuation, as the US Gross Domestic Product (GDP) and the US Personal Consumption Expenditures (PCE) Price Index are set to be released this week. After the hot inflation print from two weeks ago, another higher-than-expected PCE figure could trigger expectations for a rate hike, rather than an interest rate cut as the first move from the US Federal Reserve (Fed). 

Natural Gas is trading at $1.98 per MMBtu at the time of writing.  

Natural Gas news and market movers: Tail risk deflates

  • European Gas prices are seeing a broader correction than US Gas prices, down over 3%. as tail risks deflating quickly in the Middle East and European Gas storages still reasonably well-stocked.
  • Interfax reports that Swedish Foreign Minister Tobias Billström said  that the European Union plans to consider a ban on Russian Liquefied Natural Gas (LNG) imports as part of the 14th sanctions package.
  • BloombergNEF calculated that Europe should have its Gas storage back to 100% full by October. The report was released on Bloomberg onMonday. 
  • Good news comes from the US Freeport LNG plant, where operations are restarting after being offline for nearly two weeks. 

Natural Gas Technical Analysis: Expect risk to linger while easing

Natural Gas is trading in a consolidation pattern here for the coming weeks. Certainly, there is room for some easing with the summer season ahead and less demand for Gas. Meanwhile, the recent uptrend since February keeps holding and could spark up at any moment if tensions in the Middle East flare up. While Europe is restocking for the next heating season, no big sell-off is expected in Gas prices with the supportive demand throughout the summer period from Europe. 

On the upside, the blue line at $2.11, the 2023 low, is the level to watch. Next, the 100-day Simple Moving Average (SMA) at $2.12 becomes the main resistance level.

On the downside, the 55-day SMA around $1.88 should be a safety net. Below it, the green ascending trend line near $1.87 should support the ongoing rally since mid-February. If that level breaks, a dive to $1.60 and $1.53 would not be impossible. 

Natural Gas: Daily Chart

Natural Gas: 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.

 

Disclaimer: For information purposes only. Past performance is not indicative of future results.
placeholder
Silver Price Forecast: XAG/USD falls to near $31.50 amid hawkish FedspeakSilver price continues to lose ground after retreating from the highest level of $32.51, a level not seen since December 2012.
Source  Fxstreet
Silver price continues to lose ground after retreating from the highest level of $32.51, a level not seen since December 2012.
placeholder
Gold rallies on haven appeal and expectations of lower interest ratesGold price (XAU/USD) trades almost a percentage point higher in the $2,360s on Friday.
Source  Fxstreet
Gold price (XAU/USD) trades almost a percentage point higher in the $2,360s on Friday.
placeholder
Gold rises as markets eye lower interest rates, higher Chinese demandThe Gold price (XAU/USD) is trading up by almost a percent, in the $2,320s on Monday, as markets weigh the implications of weaker-than-expected US jobs data on interest rates – a key driver of Gold price – and economic data from China, a major market for Gold, stays in expansive territory.
Source  Fxstreet
The Gold price (XAU/USD) is trading up by almost a percent, in the $2,320s on Monday, as markets weigh the implications of weaker-than-expected US jobs data on interest rates – a key driver of Gold price – and economic data from China, a major market for Gold, stays in expansive territory.
goTop
quote