- Natural Gas pops higher towards $3.
- The US Dollar looks set for an eleventh straight week of gains.
- US Natural Gas prices are in an ascending trendline formation and could break to $3.3.
Natural Gas prices stretch higher despite Oil having all the attention in the energy space. Gas prices are soaring on more negative news out of Norway, raising concerns over gas supply from the Scandinavian bloc to Europe. Mounting supply problems could leave the old continent on balance of falling short of gas to fill up its reserves full ahead of the winter season.
The US Dollar (USD) is on track to lock in an eleventh consecutive week of gains as the interest-rate differential between the US and other countries gets bigger by the day. This differential keeps backing the US Dollar as it does the flight to safe havens, where the Greenback is the place to be. King Dollar’s rally hasn’t likely finished and might head toward the 52-week high when measured by the DXY US Dollar Index.
Natural Gas is trading at $3.00 per MMBtu at the time of writing.
Natural Gas news and market movers
- The Norwegian Asgard field is having unforeseen capacity reductions due to a delayed ramp up after maintenance, network manager Gassco AS said Thursday.
- Also in Norway, the works at the Kvitebjorn field are extended to October 1.
- The Norwegian Oseberg field and the Emden terminal are as well signalling issues and delays in reopening by another three days until after October 1.
- Contracts for September are rolling off on Thursday. Looking back at their performance, the September contracts have moved up 15% in value, with a 4.2% gain solely on Wednesday.
- With October set to get underway, the first big drawdowns from European gas storages might start.
- All eyes are on the weekly Energy Information Administration (EIA) publication of US gas storage changes. Expectations are for another build from 64 billion to 88 billion cubic feet.
- Aramco buys a $500 million stake in LNG firm Midocean Energy.
Natural Gas Technical Analysis: EU short of supply
Natural Gas is grinding higher at the moment when bigger brother Oil is hijacking all the headlines. The surprise delays and cuts in gas supply from Norway to Europe disrupts the supply side briefly, which grants an upside move. On the technical front, the current bullish triangle is an element to watch as a breakout might see Natural Gas trading near $3.3 soon.
Awaiting the breakout of the triangle, $3 remains a key level that needs to be broken. Seeing the current equilibrium, a catalyst is needed to move the needle upwards. Gas prices could rally to $3.25 in a bullish triangle breakout, testing the upper band of the ascending trend channel.
On the downside, the ascending trendline at $2.90 should support any attempts to break lower. The 200-day Simple Moving Average (SMA) at $2.80 could act as a circuit breaker in case there is a nosedive move. Should that give way, some area will be crossed before the next support kicks in at $2.75. This level aligns with the 55-day SMA, which is likely to step in to avoid any price crashes in the commodity.
XNG/USD (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.
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