- The price of Natural Gas reaches a new two-month high.
- The price of Gas soars due to the possibility that the United States will expand sanctions against the Iranian oil sector.
- The US Dollar Index partially recovers from Tuesday's decline, boosted by a big miss in the PMI numbers.
Natural Gas (XNG/USD) maintains its recent gains on Wednesday, following two days of gains triggered by a possible escalation of tensions in the Middle East, as the US prepares to expand sanctions against the Iranian oil sector . Early last week, the Biden administration said it was preparing a sanctions package that would not disrupt oil exports to prevent a spike in prices. However, by backtracking and now issuing sanctions against the Iranian oil sector, tensions could escalate in the coming days, fueling prices in the broader energy space.
For its part, the US Dollar Index (DXY), which tracks the price of the Dollar against six major currencies, fell sharply on Tuesday after preliminary figures for the Purchasing Managers' Index (PMI) for April were released. Aside from the weaker than expected data, the manufacturing component fell below the 50 level, showing a contraction in the sector. However, the US dollar recovers on Wednesday, with traders assessing expectations regarding the timing of the initial interest rate cut by the US Federal Reserve (Fed).
Natural Gas is trading at $2.15 per MMBtu at the time of writing these lines.
News about Natural Gas: Tensions and supply problems
- Supply problems in Europe: the Hammerfest liquefied natural gas (LNG) plant in Norway is completely stopped due to a leak, according to Bloomberg. It is expected to remain closed at least until Friday.
- Marco Saalfrank, head of trading in continental Europe and member of the Board of Directors of Axpo Solutions AG, stated in an interview with Bloomberg that the Gas market is also currently driven by sentiment, which is increasing volatility, as Europe is still It lacks structural changes to replace the supply of Gas from Russia.
- The United Kingdom is also facing some problems, with the Elgin Franklin field in the British North Sea unscheduled for at least another day.
- US sanctions on the Iranian oil sector will be signed by US President Joe Biden next week, after the US Senate approved tougher measures.
Technical analysis of Natural Gas: Markets surprised by the tightening of sanctions
Natural Gas finally broke out of the range in which it had been stuck since the end of January, between $1.60 and $2.11. A range close to $0.50 that is now broken after the US is going to expand sanctions on the Iranian oil sector. In the domino effect of rising oil prices and rising tensions in the Middle East, a stronger US dollar could become a side effect of this bill to be signed by US President Joe Biden. next week.
To the upside, the blue line at $2.11, the 2023 low, and the 100-day SMA at $2.12 have been broken, leading to a new two-month high. Further up, the next resistance level is the January 25 high, near $2.33.
With the firm breakout of the $2.11 zone, the mentioned elements (the 100-day SMA and the blue pivot line) should now act as support. Traders could expect a pullback under some profit taking, which this level should be able to support. If it were to still break below, XNG/USD could see a move towards $1.92, testing a bounce from the red descending trend line.
Natural Gas: Daily Chart
Frequently asked questions about Natural Gas
What fundamental factors determine the price of Natural Gas?
Supply and demand dynamics are a key factor influencing Natural Gas prices, and in turn are 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.
