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- Natural gas is trying to halt a four-day losing streak on Tuesday.
- Traders are evaluating a mix of data, while European gas inventories are 73.41% full.
- The US Dollar Index is trading slightly higher after its downbeat performance on Monday.
The price of natural gas (XNG/USD) traded broadly flat on Tuesday, holding above the $2.80 level as it attempts to avoid a five-day losing streak. The easing of pressure on energy commodity prices comes after Israeli Prime Minister Benjamin Netanyahu dismantled his war cabinet, and humanitarian aid convoys were allowed to enter the Gaza area on Monday. This defuses a period of tension in the region since October 10, 2023, when Hamas attacked the Israeli music festival.
at the same time, US dollar index The DXY index, which tracks the value of the US dollar against six major currencies, started the week lower, although it is moderately in the green ahead of the US. Retail Data for May, which will be released later today. Markets are starting to mitigate the risks of the European elections and are starting to focus again on the US data. Add in at least six speakers from the US Federal Reserve on Tuesday, and the dollar is set to face some fundamental moves.
Natural gas is trading at $2.87 per million British thermal units at the time of writing.
Natural Gas News and Market Drivers: It’s hard to pick any important data point
- European LNG inventories combined are nearly 73.41% full, returning to mid-January levels earlier this year, according to Bloomberg data.
- Shell Plc will buy liquefied natural gas trading company Pavilion Energy from Singapore’s state-owned Temasek Holdings. Pavilion Energy trades and ships LNG in Asia and Europe, Reuters reported.
- The flow of Norwegian gas to Europe has returned to normal after a series of unexpected outages, Gasco told Bloomberg.
- Var Energi and VNG are extending their cooperation for another 12 years, with an agreement from Var Energi to deliver 5 billion cubic meters of liquefied natural gas to VNG, Bloomberg reported.
Natural Gas Technical Analysis: Europe’s reserves are on the right track
Natural gas prices are set to fall further despite efforts by traders to keep XNG prices at current levels. As Europe’s natural gas storage capacity approaches in time for the start of the heating season, the risk of a slowdown in demand may take hold. Add to this the decline in tensions in the Middle East, and the outlook for LNG in the near term looks bleak.
The pivot level near $3.08 (highest since March 6, 2023) remains key after its false breakout last week. In addition, the red downtrend line at $3.10 will also act as cover. Furthermore, the new YTD high of $3.16 is the level to beat.
On the downside, the 200-day simple moving average is acting as first support near $2.54. If this support area fails to hold, the next target could be the pivot level near $2.14, with temporary support at the 55-day simple moving average near $2.44. In case of further decline, the biggest support comes at $2.18 with the 100-day simple moving average.
Natural gas: daily chart
Frequently asked questions about natural gas
Supply and demand dynamics are a major factor affecting natural gas prices, and are themselves influenced by global economic growth, industrial activity, population growth, production levels, and inventories. Weather affects natural gas prices because more gas is used during cold winters and hot summers for heating and cooling. Competition from other energy sources affects prices as consumers may switch to cheaper sources. Geopolitical events are factors as embodied in the war in Ukraine. Government policies related to extraction, transportation, and environmental issues also affect prices.
The main economic release that affects natural gas prices is the weekly inventory bulletin issued by the Energy Information Administration (EIA), a US government agency that produces US gas market data. The EIA Gas Bulletin is usually issued on Thursday at 14:30 GMT, one day after the EIA publishes its weekly Oil Bulletin. Economic data from major natural gas consumers can impact supply and demand, the largest of which include China, Germany and Japan. Natural gas is priced and traded primarily in US dollars, so economic releases that affect the US dollar are also a factor.
The US dollar is the world’s reserve currency and most commodities, including natural gas, are priced and traded in 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 fewer dollars are needed to buy the same volume of gas (a lower price), and vice versa if the US dollar strengthens.
