Natural Gas steadies despite escalating Middle Eastern tensions

Source Fxstreet
  • Natural Gas trades in a tight range around $2.50.
  • Traders see short-term reasons for sending Gas futures higher.
  • The US Dollar Index remains steady in the mid-103.00 area after a failed close overnight.

Natural Gas (XNG/USD) is off the lows after its steep decline throughout this week. Although supply is still very much solid and flowing, there are a few elements that are starting to worry traders. The biggest factor is the escalation of tensions in Yemen, with more strikes in the Red Sea, and Iran attacking Pakistan. 

Meanwhile, the US Dollar (USD) is playing with fire after the Greenback has been on a tear all week. In the late hours of the US closing bell on Wednesday, the US Dollar Index (DXY) retreated and failed to hold ground above two important technical supports. This means that the lifecycle of this recent US Dollar strength could be short-lived. 

Natural Gas is trading at $2.51 per MMBtu at the time of writing.  

Natural Gas market movers: Worries on the summer for Europe

  • Frost in Texas and Louisiana is making it impossible to load US Liquified Natural Gas (LNG) onto carriers. This means some delay in deliveries in the short term even as warmer weather is expected to come in next week .
  • Europe looks well equipped to get through the winter for this year. However, not many deals have been put on the table to get Gas in over the summer to get ready for the next winter. The longer this takes, the bigger the risk of  a shortfall for next year.
  • The situation in the Red Sea is entering a next level of heightened tensions with more attacks reported  by US and UK forces in Yemen against Houthi rebels.
  • Next to that, Iran has sent several high members of its civil guard to Yemen to stand with the Houthi rebels while Iran itself has performed attacks against Pakistan. 
  • At 15:30 GMT, the Energy Information Administration will release the weekly Gas Storage changes. Expectations are for a drawdown from 140 billion cubic metres to a drawdown of 164 billion cubic metres. 

Natural Gas Technical Analysis: A bit too low

Natural Gas is trying to salvage a touch from its steep decline earlier this week. Seeing the above bullet points, the current level near $2.50 might be a bit too cheap. A risk premium to be added makes sense and could still come overtime, with a fair value seen near $2.70.

On the upside, Natural Gas is facing all the important Simple Moving Averages (SMA) as resistance levels. First up, nearby is the 200-day SMA near $2.75. Next up is the 55-day SMA at $2.85. Last but not least,  the 100-day SMA is at $2.95, near $3.

The ascending trend line broke earlier this week and already triggered firm rejection on Wednesday at the top side. Support near $2.47 is held for now. In case Gas prices fall further, expect to see a full swing decline towards $2.20 and test the low of December.

XNG/USD (Daily Chart)

XNG/USD (Daily Chart)

Natural Gas FAQs

What fundamental factors drive the price of Natural Gas?

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.

What are the main macroeconomic releases that impact on Natural Gas 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.

How does the US Dollar influence Natural Gas prices?

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
Top 3 Price Prediction: Bitcoin, Ethereum, Ripple — BTC, ETH and XRP defend key support as rebound scenario stays in playBTC holds above $90,000, ETH hovers near $3,128 at the 50-day EMA, and XRP steadies above $2.07 as traders weigh rebound targets and key downside levels.
Author  Mitrade
Jan 09, Fri
BTC holds above $90,000, ETH hovers near $3,128 at the 50-day EMA, and XRP steadies above $2.07 as traders weigh rebound targets and key downside levels.
placeholder
Solana Future: From high-speed experiment to corporate treasury playbook for the next SOL cycleSolana’s Proof of History architecture is colliding with rising institutional treasury adoption and governance scrutiny, with SOL’s next cycle hinging on validator distribution, stability, and regulated capital access.
Author  Mitrade
Jan 12, Mon
Solana’s Proof of History architecture is colliding with rising institutional treasury adoption and governance scrutiny, with SOL’s next cycle hinging on validator distribution, stability, and regulated capital access.
placeholder
Meme Coins Price Prediction: DOGE, SHIB and PEPE struggle to stabilize as sellers keep controlDOGE steadies near $0.1350 above $0.1332 support, SHIB holds the 50-day EMA at $0.00000834, and PEPE stays above $0.00000500 as momentum signals warn of further downside.
Author  Mitrade
21 hours ago
DOGE steadies near $0.1350 above $0.1332 support, SHIB holds the 50-day EMA at $0.00000834, and PEPE stays above $0.00000500 as momentum signals warn of further downside.
placeholder
Gold Price Forectast: XAU/USD rises above $4,600 on US rate cut expectations, Fed uncertainty Gold price (XAU/USD) rises to around $4,600 during the early Asian session on Wednesday. The precious metal gains momentum as traders firm up bets on US interest rate cuts after the release of inflation data.
Author  FXStreet
2 hours ago
Gold price (XAU/USD) rises to around $4,600 during the early Asian session on Wednesday. The precious metal gains momentum as traders firm up bets on US interest rate cuts after the release of inflation data.
placeholder
Bitcoin Eyes $92K Breakout as Stocks Reach Fresh Records on Soft US CPI DataBitcoin nears $93,000 as lower-than-expected US inflation data supports a surge in risk assets.
Author  Mitrade
1 hour ago
Bitcoin nears $93,000 as lower-than-expected US inflation data supports a surge in risk assets.
goTop
quote