- Natural Gas prices once again exceed $1.80.
- Asian Gas traders are flocking to the European market, creating an imbalance between buyers and sellers.
- The US Dollar Index DXY is trading in the 103.00 area ahead of two important central bank meetings.
Natural Gas (XNG/USD) prices rise above $1.80 this Monday, as Asian traders appear to be operating again in the European Gas futures market. This creates an imbalance in the already fragile European gas market, increasing doubts about whether the Old Continent will be able to replenish its reserves for the next heating season. Although stockpiles have not fallen as much as expected this winter, new deals to ensure replenishment are not happening and Asian traders are buying up current contracts at cheap prices.
The US dollar is trading stable this Monday awaiting two important central bank meetings: that of the Bank of Japan (BoJ) and that of the US Federal Reserve, on Tuesday and Wednesday, respectively. The BoJ is expected to abandon its negative rate policy, which would mark the first rate hike in 17 years. For its part, the Fed will have to calm market nerves after bringing forward the initial rate cut to September following stronger-than-expected inflation data last week.
Natural Gas is trading at $1.85 per MMBtu at the time of writing these lines.
Natural Gas News and Market Drivers: Achilles Healing
- Bloomberg Energy reported this Monday that demand for Natural Gas in Asia has returned to pre-pandemic levels. India is expected to even exceed its pre-pandemic Gas demand, with more new plants coming online in 2024-2025.
- Gas flows at the US facilities of Freeport, in Texas, remain reduced and lower production is expected to continue until the end of April.
- A cold front will hit Europe next week, which could further reduce the continent's reserves.
- Ole Sloth, head of commodities strategy at Saxo Bank, said that Ukraine's recent attacks on Russian facilities should be taken into account as a reason for the rise in Natural Gas prices.
Technical analysis of Natural Gas: Are $2 possible?
Natural Gas prices could be witnessing a perfect cocktail, as the European Gas market faces strong pressures. On the one hand, Russian President Vladimir Putin's landslide victory will see him respond even more severely to Ukraine's ongoing attacks on Russian Oil and Gas facilities, with measures that could disrupt flows to Europe. Meanwhile, Asian operators are buying currently cheap gas contracts in the European market, which could leave Europe with high prices heading into the next heating season.
On the upside, we must first recover the key $2.00 level. The next key level is the historical pivot at $2.12, which is broadly consistent with the 55-day SMA at $2.09. In case Gas prices rise in that area, a wide area opens with the first limit at the red descending trend line nearby at $2.40.
To the downside, multi-year lows are close, with $1.65 as the first line in the sand. Also keep an eye on this year's low at $1.60. Once a new yearly low is recorded, traders should look to $1.53 as the next support zone.
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.
