Natural Gas regains control of rally and locks in Friday's gains

Natural Gas price swings back up and gains 3%.
Egypt has issued a bigger than expected tender for more than 15 LNG cargoes.
The US Dollar Index snaps losing streak and jumps higher, nearing 105.00.

Filip Lagaart FXStreet

Natural Gas price (XNG/USD) swings back in the green with traders brushing off the Nonfarm Payrolls print. Traders are focusing back on the short term surge in demand by Egypt that is facing energy issues over the summer. By issuing a chunky tenor, markets see a squeeze in prices unfolding.

Meanwhile, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, is jumping higher, away from the feared 104.00 level. Instead the DXY now is nearing 105.00 for this week and looks set to close out this Friday with a bang. The move is being enlarged a bit with US equities heading in the red as well, while some safe haven flow finds its way into the Greenback.

Natural Gas is trading at $2.93 per MMBtu at the time of writing.

Natural Gas news and market movers: Egypt back in focus

With hopes for at least one rate cut out of the way, the US economic conditions remain contrained, which means sluggish demand ahead for commodities.
Reuters reported on Friday that Egypt has released tender details for at least 15 LNG cargoes with deliveries to cover summer demand.
Taiwan has signed a three-decade-long agreement with Qatar to buy LNG to fill the gap for its missing Nuclear and Coal energy, which is being phased out.
Bloomberg reports that Gazprom CEO Alexey Miller and Turkey’s Energy Minister Alparslan Bayraktar have discussed further plans for an international Gas hub during a meeting in St. Petersburg.

Natural Gas Technical Analysis: Swing higher

Natural Gas trades higher again after a perfect technical bounce earlier this week against the 200-day Simple Moving Average (SMA) at $2.53. From here on out, the question is whether that bounce is strong enough to head to $3.08 on the upside.

On the upside, the $3.00 marker as a big figure was tested in May and remains a first element to watch out for on the upside. The pivotal level near $3.07 ( March 6, 2023, high) remains key as prices failed to post a daily close above it. Further up, the fresh year-to-date high at $3.16 is the level to beat.

On the downside, the 200-day Simple Moving Average (SMA) acts as the first support near $2.53. Should that support area fail to hold, the next target could be the pivotal level near $2.14, with interim support by the 55-day SMA near $2.25. Further down, the biggest support comes at $2.11 with the 100-day SMA.

Natural Gas: Daily Chart

Natural Gas FAQs

What fundamental factors drive the price of Natural Gas?

Supply and demand dynamics are a key factor influencing Natural Gas prices, and are themselves influenced by global economic growth, industrial activity, population growth, production levels, and inventories. The weather impacts Natural Gas prices because more Gas is used during cold winters and hot summers for heating and cooling. Competition from other energy sources impacts prices as consumers may switch to cheaper sources. Geopolitical events are factors as exemplified by the war in Ukraine. Government policies relating to extraction, transportation, and environmental issues also impact prices.

What are the main macroeconomic releases that impact on Natural Gas Prices?

The main economic release influencing Natural Gas prices is the weekly inventory bulletin from the Energy Information Administration (EIA), a US government agency that produces US gas market data. The EIA Gas bulletin usually comes out on Thursday at 14:30 GMT, a day after the EIA publishes its weekly Oil bulletin. Economic data from large consumers of Natural Gas can impact supply and demand, the largest of which include China, Germany and Japan. Natural Gas is primarily priced and traded in US Dollars, thus economic releases impacting the US Dollar are also factors.

How does the US Dollar influence Natural Gas prices?

The US Dollar is the world’s reserve currency and most commodities, including Natural Gas are priced and traded on international markets in US Dollars. As such, the value of the US Dollar is a factor in the price of Natural Gas, because if the Dollar strengthens it means less Dollars are required to buy the same volume of Gas (the price falls), and vice versa if USD strengthens.

Author

Filip Lagaart

FXStreet

Filip Lagaart is a former sales/trader with over 15 years of financial markets expertise under its belt.

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