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
Nasdaq Index Rises for 10 Straight Days, Why Has Tesla Barely Risen?On April 14, the Nasdaq notched its tenth consecutive session of gains, marking its longest winning streak since 2023. It has risen nearly 14% from its recent lows, as the 'Magnificent Se
Author  TradingKey
10 hours ago
On April 14, the Nasdaq notched its tenth consecutive session of gains, marking its longest winning streak since 2023. It has risen nearly 14% from its recent lows, as the 'Magnificent Se
placeholder
Gold eases from four-week top as Hormuz risks temper USD weaknessGold (XAU/USD) hits a nearly four-week high during the Asian session on Wednesday, though it lacks follow-through buying and currently trades just below the $4,850 level, nearly unchanged for the day.
Author  FXStreet
13 hours ago
Gold (XAU/USD) hits a nearly four-week high during the Asian session on Wednesday, though it lacks follow-through buying and currently trades just below the $4,850 level, nearly unchanged for the day.
placeholder
Silver Price Forecasts: XAG/USD approaches $78.00 boosted by Iran peace hopesSilver (XAG/USD) is rushing higher on Tuesday, reaching fresh two-week highs right below $78.00 at the time of writing, after bouncing from lows around $72.60 on Monday.
Author  TradingKey
Yesterday 10: 01
Silver (XAG/USD) is rushing higher on Tuesday, reaching fresh two-week highs right below $78.00 at the time of writing, after bouncing from lows around $72.60 on Monday.
placeholder
Trump Blockade of Strait of Hormuz Drives Oil Price Surge, Will This Be Another TACO? On Sunday (April 13), Trump announced following the breakdown of U.S.-Iran negotiations that the U.S. Navy would impose a maritime blockade on Iranian ports starting Monday.Following the
Author  TradingKey
Apr 13, Mon
On Sunday (April 13), Trump announced following the breakdown of U.S.-Iran negotiations that the U.S. Navy would impose a maritime blockade on Iranian ports starting Monday.Following the
placeholder
U.S.-Iran Standoff in the Strait of Hormuz. Iranian-Controlled Strait Has Not Resumed Passage; Why Does Trump Still Want a Military Blockade?Following the failure of U.S.-Iran peace talks, President Trump announced on Sunday that the U.S. Navy will immediately blockade the Strait of Hormuz and prevent any vessels that have pai
Author  TradingKey
Apr 13, Mon
Following the failure of U.S.-Iran peace talks, President Trump announced on Sunday that the U.S. Navy will immediately blockade the Strait of Hormuz and prevent any vessels that have pai
goTop
quote