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Natural Gas breaks higher as strikes in Australia push European prices up more than 10%

  • Rupture of the price of Natural Gas after the failure of negotiations between Chevron and the Australian unions.
  • The Dollar will close with weekly gains, in what is almost its best week of 2023.
  • The price of Natural Gas could extend the recovery and reach $2.95.

Natural Gas prices are heading higher at the beginning of the American session. Strikes at Australian ports are inevitable and could end up causing a reduction in supply on world markets. The Australian country represents 10% of the world’s supply of liquefied natural gas (LNG), so an interruption of the country’s gas flows could cause a sharp drop in gas prices if supply is not able to cope or replace the missing 10% in the short term.

At the time of writing these lines, Natural Gas is trading at $2.85 per MMBtu.

News about Natural Gas and market engines

  • European Gas futures, more sensitive to supply problems, rise 15% thanks to the news from Australia.
  • The Gorgon and Wheatstone facilities will be closed from 05:00 GMT. These two plants alone represent 7% of the world’s supply.
  • The stoppages will be brief and there will be no overtime. If an agreement is not reached before September 14, the plants will stop completely for two weeks.
  • This action is the culmination of several weeks of discussions that kept the markets in suspense. According to sources from both Chevron and the unions, several key issues remain to be discussed.
  • In a statement on Facebook, the Offshore Alliance union said: “Chevron’s negotiating performance has been the most inept effort of any employer the union has dealt with in the last five years and our members are fed up.”
  • Baker Hughes’ US rig count data could get a little more attention to see if the US can supply itself sufficiently when it comes to LNG production.

Natural Gas Technical Analysis: Finally some movement

Natural Gas is breaking out and is already trading above the highs recorded on Wednesday and Thursday. After weeks of nervous communication, traders can finally turn to more binary trading setups as the risk of a complete shutdown is just days away. With the clock ticking, Gas prices are expected to rise as the risk of lower supply increases.

On the bullish side, for this rebound to gain momentum it is necessary to exceed $2.83. Once this bounce materializes, look for the 200-day SMA near $2.95. Should the price start to break above that level and head higher, $3 will be crucial with the September high in play.

To the downside, the trend channel has done a great job of propping up the price action. The 55-day SMA has already provided support ahead of any test at the lower end of the trend channel. In case of a break of the 55-day SMA, support can be sought near $2.65.

XNG/USD (Daily Chart)

XNG/USD Daily chart

Frequently Asked Questions about Natural Gas

What fundamental factors determine the price of Natural Gas?

Supply and demand dynamics is a key factor influencing Natural Gas prices, and is in turn influenced by global economic growth, industrial activity, population growth, production levels and inventories. Weather influences natural gas prices because it is used more during cold winters and hot summers for heating and cooling. Competition from other energy sources influences prices, as consumers can switch to cheaper sources. Geopolitical events, such as the war in Ukraine, also play a role. Government policies regarding extraction, transportation, and environmental issues also influence prices.

What are the main macroeconomic publications that influence Natural Gas prices?

The main economic publication that influences Natural Gas prices is the weekly inventory bulletin of the Energy Information Administration (EIA), the US government agency that compiles data on the US gas market. The EIA’s gas bulletin is usually published on Thursday at 14:30 GMT, one day after the EIA publishes its weekly oil bulletin. The economic data of the large consumers of Natural Gas can influence supply and demand, among which China, Germany and Japan stand out. Natural gas is quoted and traded primarily in US dollars, so economic releases affecting the dollar are also a factor.

How does the Dollar influence the price of Natural Gas?

The US dollar is the world’s reserve currency and most commodities, including Natural Gas, are quoted and traded on international markets in US dollars. As such, the value of the Dollar is a factor that influences the price of Natural Gas, since if the Dollar strengthens, fewer dollars are needed to buy the same volume of gas (the price falls), and vice versa if the Dollar falls. strengthens.

Source: Fx Street

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