Natural Gas faces headwinds with summer future contracts facing worst demand ever

Natural Gas (XNG/USD) completely drops the ball and sinks in red numbers for this Tuesday. The premature winning streak ends quite quickly with traders selling near term contracts as further dated contracts are selling off even harder. Biggest reason is the abscence of European demand in the market where apparently demand to refuel the gas stockpiles is even more disappointing as first anticipated. 

Meanwhile, the US Dollar (USD) is gearing up for the first of many eventful days this week. Today, the so-called Super Tuesday takes place in the presidential primary election. The second big event will take place on Thursday, with the European Central Bank (ECB) monetary policy decision as a litmus test for the US Federal Reserve meeting on March 20. Ahead of Super Tuesday Primaries results, traders will pay attention to the S&P Global Services Purchasing Managers Index (PMI) and the Institute for Supply Management (ISM) data release. 

Natural Gas is trading at $1.97 per MMBtu at the time of writing.  

Natural Gas market movers: European tepid demand puts bulls under pressure

• The near term selling pressure is taking over from the longer term speculation with firm selling pressure ahead of the US opening bell. 
• According to a weekly Bloomberg report, global weekly LNG supply fell by 13% for the week of February 26 against the previous week. 
• Temperatures are set to fall again in China and Europe, heading back below 10 degrees Celsius, which is below the 10-year average.
• European demand is not picking up, forcing several Gas cargoes to stay at sea. Roughly 3 million metric tons have been afloat at sea for more than 20 days, a very high number compared to normal standards. 
• Russia is facing headwinds from fresh US sanctions issued two weeks ago. Russia had ordered icebreaker vessels for its Arctic LNG 2 exports at a South Korean shipbuilder. However, under the new sanctions, Hanwha Ocean (the South Korean shipbuilder) is forbidden to sell to Russia, which means Russia is unable to open its arctic installation for production and exports. 

Natural Gas Technical Analysis: A rally comes not that easily

Natural Gas prices are facing more upside pressure with both Qatar and the US delivering less than 13% of the normal weekly volume. These chunky drawdowns in supply are moving the needle quite quickly, with Gas prices soaring for the second consecutive day and exceeding the $2 level again. Though, the current selling pressure seen specifically in the summer contracts, is spilling over into the near term contracts and is erasing the earlier tailwind for Natural Gas. 

On the upside, Natural Gas is breaking that $1.99-$2.00 marker – the level which, when broken on the way down, saw an accelerated decline back at the beginning of February. After that, the green line at $2.13 comes into view, where the triple bottoms from 2023 are placed. If Natural Gas sees a sudden demand pickup, $2.40 could come into play. 

On the downside, $1.64 and $1.53 (the low of 2020) are targets to look out for. Ahead of those levels, the recently created pivotal levels at $1.86 and $1.80 should be able to provide some support and slow down any downside moves.

XNG/USD (Daily Chart)