Natural Gas remains stable as excess supply increases

• The demand for Natural Gas continues to be low and reserves are high.
• The US dollar is under pressure after weak US data ahead of the jobs report.
• Sideways to lower Natural Gas price expected as supply issues start to ease.

The price of Natural Gas has risen substantially this week after Chevron received notice of strikes due to take place in early September at several major LNG terminals in Australia. As the week progressed, another local exporter reached an agreement and avoided future strikes. This opens the door for Chevron to reach an agreement as well, which would mean that any supply problems will be limited for the foreseeable future.

Meanwhile, demand remains stable, as the European bloc has far exceeded its target of filling strategic gas reservoirs for this winter. The European bloc has committed to dispense with Russia’s fossil fuels by 2027. Yet EU countries have bought a record 52% of all cubic meters of LNG Russia has exported this year.

At the time of writing these lines, Natural Gas is trading at $2.92 per MMBtu.

News about Natural Gas and market drivers

• The Energy Information Administration (EIA) will publish the weekly Natural Gas storage changes for this week at 14:30 GMT. According to the latest news, a new accumulation of 18 to 29 billion cubic feet is expected.
• Oman LNG has signed a new agreement with Shell and OQ for the supply of LNG.
• LNG consumption in China in July has increased by 9.6% year-on-year.
• The recent series of weaker data coming out of the US, with a lower-than-expected Gross Domestic Product and a substantial decline in JOLTS job offers in the US, could point to lower demand for LNG in the coming quarters.
• European gas reserves stand at 93% and this week they have continued to grow.
• Australian local exporter Woodside Energy Group Limited has reached an important agreement with the unions. This could mean that Chevron could also reach an agreement shortly, thus alleviating any possible strike action in early September.
• Tropical Storm Idalia is heading toward Georgia as it weakens to a Category 1 hurricane.
• All eyes remain on Friday’s US jobs report.

Technical Analysis of Natural Gas: little by little

Natural Gas has been on a roll this week and is starting to face some headwinds. With demand no longer picking up and supply possibly not being as tight as originally anticipated, a small rebalancing in gas prices could occur. Profit taking is to be expected on this week’s rally, which means that the $3 area looks unreachable.

To the upside, $3 remains the level to watch once Natural Gas prices can recover to $2.9. If prices recover, a close above $2,935, the August 15 high, will have to be looked for to confirm that demand is picking up again. Further rallies towards $3 and $3,065 (August 9 high) would be targets or levels to watch.

To the downside, the trend channel has done a great job of propping up price. Aside from a small false breakout, ample support has been provided near $2.60. The 55-day SMA has to provide that much-needed support at $2.69 ahead of the rising trend channel at $2.61. Any dips can still be caught by the 100-day SMA near $2.55.

XNG/USD daily chart