Natural Gas heading into low-price regime

Source Fxstreet
  • Natural Gas keeps retreating with more bearish elements in the mix.
  • Traders are pushing gas to substantial lower levels which could mean longer term low pricing.
  • The US Dollar Index is flat for this week’s performance ahead of PPI and Michigan numbers.

Natural Gas (XNG/USD) is trading back around $1.65 and is facing more downward pressure. Recent US data shows that demand for Gas is now not only abating in Europe, but also in the US. The decline towards $1.50 could mean that Gas prices are heading into a region of substantially lower pricings for longer with redundancy at peak levels against tepid global demand. 

The US Dollar (USD) meanwhile has eased back to its entry level from Monday. The underperforming Retail Sales print from Thursday was enough to erase the red-hot inflation print from Tuesday. Traders are gearing up to close the US Dollar Index (DXY) either at a loss or a profit on the back of US Producer Price Index (PPI) numbers and University of Michigan numbers. 

Natural Gas is trading at $1.65 per MMBtu at the time of writing.  

Natural Gas market movers: World growth stalling demands repricing

  • Eni has released its fourth quarter profit, which matched estimates. One big element in the report was that the profits from the Natural Gas business were enough to cover the weakness in the refining and chemicals branch. 
  • Associated Press said that blasts have hit a Natural Gas Pipeline in Iran, near Bakhtiari province. Iranian officials confirmed that it was an act of sabotage. 
  • Even over the weekend higher-than-normal temperatures are heading over the European continent, limiting short-term draws of Gas out of the storage facilities. 
  • European gas storages are still 66% full, above the 5-year average of 50% for this time of year.

Natural Gas Technical Analysis: RSI defies logic

Natural Gas is struggling to find any platforms to bounce off. More short term and long term issues are arising for the energy commodity with short term global growth starting to abate, which means less demand. In the longer term, the shift away from fossil fuels means less demand. So a longer-term repricing where Natural Gas might not make its way back up  above $2.00 could be on the horizon, and which pushes the Relative Strength Index (RSI) in an “oversold” regime for longer.

On the upside, Natural Gas is facing some pivotal technical levels to get back to. First stop is $1.99, – the level which, when broken, saw an accelerated decline. Next is the blue line at $2.13 with the triple bottoms from 2023. In case Natural Gas sees sudden demand pick up, possibly $2.40 could come into play. 

Keep an eye on $1.80, which was a pivotal level back in July 2020 and should act as a cap now. Should more supply emerge in the markets, or more weakening data globally point to even more sluggish global growth – $1.64 and $1.53 (the low of 2020) are targets to look out for. 

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
Geopolitical Premium Strikes Back. Hormuz Strait Reopening Faces Changes, Bitcoin Barely Holds 70,000 Psychological LevelMiddle East tensions escalate ahead of negotiations, causing Bitcoin to pull back after a surge, with $70,000 becoming the watershed between bulls and bears.On April 9, unexpected develop
Author  TradingKey
9 hours ago
Middle East tensions escalate ahead of negotiations, causing Bitcoin to pull back after a surge, with $70,000 becoming the watershed between bulls and bears.On April 9, unexpected develop
placeholder
Strait of Hormuz Closes Again, When Will Global Energy Supply See Light Again?The outlook for navigation through the Strait of Hormuz remains clouded by uncertainty, as the newly reached ceasefire agreement has failed to bring stability to this global energy choke
Author  TradingKey
9 hours ago
The outlook for navigation through the Strait of Hormuz remains clouded by uncertainty, as the newly reached ceasefire agreement has failed to bring stability to this global energy choke
placeholder
Gold edges lower below $4,750 amid fragile Middle East ceasefire Gold price (XAU/USD) trades in negative territory around $4,705 during the early Asian session on Thursday. The precious metal edges lower amid a temporary two-week ceasefire between the US and Iran.   
Author  FXStreet
9 hours ago
Gold price (XAU/USD) trades in negative territory around $4,705 during the early Asian session on Thursday. The precious metal edges lower amid a temporary two-week ceasefire between the US and Iran.   
placeholder
Gold remains depressed as skepticism over US-Iran truce supports USDGold (XAU/USD) once again shows some resilience below the $4,700 mark during the Asian session on Thursday, and for now, seems to have stalled the previous day's retracement slide from a three-week high.
Author  FXStreet
12 hours ago
Gold (XAU/USD) once again shows some resilience below the $4,700 mark during the Asian session on Thursday, and for now, seems to have stalled the previous day's retracement slide from a three-week high.
placeholder
U.S.-Iran Ceasefire. Bitcoin Surges Past $72,000, 80,000 Within Reach?The U.S.-Iran ceasefire agreement triggered a surge in Bitcoin of over 4%, with the Islamabad negotiations starting this Friday serving as a key driver for further gains.On April 8, a bri
Author  TradingKey
Yesterday 10: 12
The U.S.-Iran ceasefire agreement triggered a surge in Bitcoin of over 4%, with the Islamabad negotiations starting this Friday serving as a key driver for further gains.On April 8, a bri
goTop
quote