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Natural Gas soars higher in US Jobs Report aftermath

  • Natural Gas trades firmly in the green after upbeat US Jobs numbers.
  • Traders are seeing a rebound in European industrial output stall because of uncertainties. 
  • The US Dollar Index junps over 103 and heads to 104 in US Nonfarm Payroll aftermath. 

Natural Gas (XNG/USD) is jumping off the fresh four-year low that got printed on Thursday at $2.04. The jump in Natural Gas comes after the US okayed plans for military strikes in both Iraq and Syria. Meanwhile a cease fire between Israel and Hamas did not go through after Hamas backtracked on earlier commitments it agreed on the terms. 

The US Dollar (USD), which is negatively correlated to Nat Gas, had a meltdown overnight where traders sold the Greenback after US Jobless data started to signal a possible tipping point. The US Challenger Job Cuts data revealed more than double the amount of layoffs in January compared to December while both Initial and Continuing Jobless Claims are starting to tick up against last week.The upbeat numbers in the US Jobs Report are erasing though the negative tone for the Greenback and are pushing the US Dollar back to elevated levels seen during the last US Federal Reserve rate decision. 

Natural Gas is trading at $2.08 per MMBtu at the time of writing.  

Natural Gas market movers: Fireworks next week on Senate hearings

  • Next week the House Energy and Commerce subcommittee will have hearings on the freeze on LNG export approvals, committee spokesman Sean Kelly said.
  • Both Chevron and Exxon beat earnings estimates with bigger-than-expected oil and gas output from shale fields mining. Both stocks are up over 2% before the US opening bell. 
  • Gas demand in Europe is not set to pick up more than normal. The hoped-for industrial recovery is not taking place due to uncertainties over a stable Gas price with the supply for next winter uncertain, and the Ukraine-Russia conflict still ongoing.
  • Japan’s Natural Gas imports have fallen to the lowest level since 2009 for January. 
  • Europe signs a deal with Algeria to buy its Gas over a period of ten years.
  • The moratorium on Gas mining projects that the Biden administration has put in place, might mean risks for Europe’s Gas dependency on US Gas deliveries for next fall and winter.  

Natural Gas Technical Analysis: LNG export freeze bullish for Gas

Natural Gas is trading on the verge of either breaking below $2.00 or jumping back above $2.10. Although Qatar said that Israel agreed to a ceasefire deal on the table, Hamas is not ready to do so. The risk of no ceasefire or a ceasefire deal at the weekend could mean a jump in both Oil and Gas prices on possible uncertainty. 

On the upside, Natural Gas is facing some pivotal technical levels to get back to. First, the low of January at $2.10 needs to be reclaimed again. Next is the intermediary level near $2.48. Once that area gets hit, expect to see a test near $2.57 at the purple line.

Once the current low at $2.04 gets tested, or broken again, expect the $2.00 big figure to crack under pressure as well. The first level to look for on the downside is near $1.96 (orange level) which goes back to August 2020. Next is the red line near $1.51, the low of June 2021. 

XNG/USD (Daily Chart)

XNG/USD (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

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

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