- Natural Gas is trading higher, more than 1%, after a new test of the $2 level.
- Operators are seeing new gas supply agreements emerging that cover long-term gas supply.
- The US Dollar Index flirts with a break below 104 as the Dollar fails to find nearby support.
He Natural Gas (XNG/USD) is trading higher this Wednesday thanks to a purely technical rebound after Tuesday's drop, in which it briefly broke below $2. The rebound appears to be short-lived as geopolitical tensions are easing somewhat with Hamas' proposal for a 135-day ceasefire, according to Saudi news channel Al Arabiya. The proposal is being studied by Israel and other parts of the region, while in the United States President Joe Biden's pause on liquefied natural gas exports is dividing political parties.
The US Dollar (USD) is feeling this de-escalation in geopolitical tensions with some safe haven exits. This causes the Dollar, which is negatively correlated with Natural Gas, to pull back from Monday's highs and look for support. The 104 marker does not look as strong and could give way, seeing the Dollar devalue a bit more before finding solid support in the form of the 200-day SMA near 103.59. Regarding market movements, no less than three members of the US Federal Reserve will speak this Wednesday.
Natural Gas is trading at $2.02 per MMBtu at the time of writing this report.
Movements in the Natural Gas market: Subcommittee hearing underway
- The ban on gas exports imposed by the president of the United States, Joe Biden, generates tensions on Capitol Hill, where a hearing of the Energy and Commerce subcommittee of the House of Representatives is being held this Wednesday.
- Qatar has agreed to lower prices for its liquefied natural gas (LNG) in a long-term deal with India. Petronet entered into the contract with the emirate for 7.5 million tonnes of LNG per year for 20 years.
- The United Kingdom has closed an agreement to sell 1 million tons of LNG with Repsol, between 2025 and 2027.
- Norway's largest oil and gas company, Equinor ASA, saw its profits fall in the fourth quarter due to substantially lower gas prices on global markets.
Natural Gas Technical Analysis: US LNG pause is not enough for now
Natural Gas is trading in very difficult circumstances to stage a recovery in any way or form. In addition to sluggish demand in Europe, markets are starting to view even the fact that Cessation of Hostilities talks are ongoing in the Middle East as a good thing. While doubts about a possible agreement were considered a risk and caused gas prices to rise, this week the signs of talks are considered a good thing, as all parties continue talking and trying to reach an agreement, which for now is negative for Gas prices.
To the upside, Natural Gas faces some fundamental technical levels to return to. First, we must recover the January low at $2.10. Next, the intermediate level near $2.48. Once this zone is reached, a test near $2.57 on the purple line is expected.
Once the current low of $2.04 is tested, or broken again, expect the big $2.00 figure to crack under pressure as well. The first level to watch on the downside is near $1.95 (orange level), which dates back to August 2020. Next, the red line near $1.51, the June 2021 low.
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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.
