- The price of Natural Gas recovered slightly on Wednesday after the Federal Reserve’s decision on interest rates.
- The price of Natural Gas continues to fall towards $2.10.
- The US dollar has depreciated substantially.
Natural Gas (XNG/USD) continues to decline despite its brief rebound following the US Federal Reserve’s (Fed) dovish decision on interest rates. Markets celebrated the Fed’s signal of upcoming rate cuts for 2024, and OPEC also helped lift gas prices with a report that pointed to possible supply shortages in the first quarters of 2024. With the next drop in interest rates, consumers are likely to start spending more, leading to increased demand for Natural Gas and crude oil and support for prices.
Meanwhile, the US Dollar (USD) is bracing for further volatility this Super Thursday as the European Central Bank (ECB), the Bank of England (BoE) and the Swiss National Bank (SNB) release their latest decisions on rates for 2023. All three, the ECB, the BoE and the SNB, kept their rates unchanged, although with a hawkish overtone, which could give them the freedom to raise at any time when necessary.
Natural Gas is trading at $2.31 per MMBtu at the time of writing this article.
Movements in the Natural Gas markets: Small rebound
- Indonesia has canceled a deal to buy LNG from TotalEnergies due to supply delays. The delay is due to attacks on its Mozambique project by organizations linked to the Islamic State.
- Shipments of Liquefied Natural Gas (LNG) accumulate in the sea due to the stagnation of European demand.
- Updated weather forecast models show milder conditions in Europe.
- Commodities company Trafigura is increasing its LNG purchases, most recently from Shell, with delivery in late January to northeast Asia.
- Maersk and Mitsubishi Gas Chemicals have agreed to build a green methanol supply base in Japan. It would be the first supply base built in the country.
- Natural gas storage figures from the Energy Information Administration will be released around 15:30 GMT. The previous figure was 117,000 million cubic meters. A reduction of 54,000 million is expected for this week.
Natural Gas Technical Analysis: Overloaded and time to recover
Natural Gas still has a few cents left to bottom out near $2.10. With the Relative Strength Index (RSI) deep in oversold territory, the moment seems ripe for Natural Gas to change the trend a bit. With the confirmation of rate reductions by the Fed, the recovery of the price of Natural Gas could occur in early 2024.
On the upside, Natural Gas could return to the purple line near $2.6 as the first hurdle. Next, the 200-day SMA at $2..74 will act as resistance before allowing Gas price to shoot up to $3, close to the 100-day SMA.
Traders face new discounts on the short-term expirations of futures contracts, which means there will be more declines as buyers wait for further declines before starting to buy. A little support could be seen near $2.20, with the June low. Firmer support should occur near $2.10, the April low, at the yellow support line.
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XNG/USD daily chart
Frequently asked questions about Natural Gas
What fundamental factors determine the price of Natural Gas?
The dynamics of supply and demand is a key factor that influences Natural Gas prices, and is in turn influenced by global economic growth, industrial activity, population growth, production levels and inventories. Climate influences Natural Gas prices because more Gas is used during cold winters and hot summers for heating and cooling. Competition from other energy sources influences prices as consumers may opt for cheaper sources. Geopolitical events, such as the war in Ukraine, also play a role. Government policies related to 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), a US government agency that produces data on the gas market in the United States. The EIA Gas bulletin usually comes out on Thursday at 14:30 GMT, the 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 primarily priced and traded in US dollars, so economic releases affecting the US dollar are also factors.
How does the dollar influence Natural Gas prices?
The US dollar is the world’s reserve currency and most commodities, including Natural Gas, are quoted and traded in international markets in US dollars. Therefore, the value of the Dollar 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 strengthens.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
