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- Natural gas held steady above $2.80 on Monday, near last week’s support.
- Traders are evaluating another outage in Norway at the Hammerfest LNG plant.
- The US dollar index is trading in the high 105.00 area, although it may face pressure from yen interventions.
The price of natural gas (XNG/USD) is trading flat to slightly higher on Monday. Despite last week’s pullback, some major risks are starting to take shape again, as Norway was forced to report an unexpected outage. This makes it very difficult for Europe to predict whether it will be refueled before the heating seasons as gas flows to Europe are unpredictable.
at the same time, US dollar index (DXY), which tracks the value of the US dollar against six major currencies, is trading near its June high, where it nearly closed at the end of last week. However, there is a risk of a quick correction as the US dollar approaches the fearsome 160.00 level against the Japanese yen, a level at which the Japanese government has intervened in the past. The last time the government intervened, the Japanese yen rose more than 5% against the US dollar ripple Its impact on DXY, which fell by approximately 2% on the back of this.
Natural gas is trading at $2.83 per million British thermal units at the time of writing.
Natural Gas News and Market Drivers: Russia Moves
- Russia is turning around the Arctic Sea faster than expected, as the LNG carrier Edward Toll passes through the Northern Sea Route. This is the fastest way to deliver LNG to Asia.
- Norwegian grid operator Gasco reported a power outage at its Hammerfest LNG plant on Monday, according to Bloomberg. Although the outage should be resolved during the day, it once again demonstrates how unreliable current gas flows from Norway to Europe are.
- Japan is buying shale gas in Texas, with Mitsui & Co. Ltd., buying some acres to explore for drilling. The site should be operational by 2026.
Natural Gas Technical Analysis: Relative Strength Index declines
Natural gas prices have fallen and may start to rise again if the Relative Strength Index (RSI) is any guide. As the price approaches $2.83, the RSI has calmed down after trading at higher levels and is currently in the middle of the range around 50.00. With gas flows constantly interrupted from Norway to Europe, it becomes very difficult to assess whether Europe will see its gas reserves filled in time.
The pivot level near $3.08 (March 6, 2023 high) remains key after its false breakout last week. In addition, the red downtrend line is at Schedule Below at $3.10 will also influence this area 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 $2.13, with temporary support at the 55-day SMA near $2.51 and the 100-day SMA at $2.21. .
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.
