Natural Gas roars over 10% in biggest uprising in 2024

Natural Gas (XNG/USD) is having a field day with a firm rally which is holding on to over 10% of gains into the US opening bell. One of the major Shale drillers, Chesapeake, is planning to cut its Natural Gas production already in 2024. The recent crash in Gas prices makes its Gas mining operations nearly unprofitable, and forces the company to cut its output, which means the global supply side will become tighter.    

The US Dollar (USD) is turning red, unable to hold on to its European gains ahead of the US opening bell and US Fed FOMC Minutes. The turn comes with a Wall Street Journal article that points to move in SOFR (Secured Overnight Financing Rate Data) which looks to be tilted to a rate hike in the coming three months. Quite a surprise of course, while meanwhile mortgage applications are sinking by 10% against last week, which could point to a decline in the housing market activities.

Natural Gas is trading at $1.84 per MMBtu at the time of writing.  

Natural Gas market movers: Tensions added

• Geopolitical tensions are being added in the equasion with the UK Navy reporting explosion and a bright flash in the Red Sea with possible Houthi attacks taking place again.
• The overall Gas supply just got smaller with Chesapeake reducing its output production for 2024. It is set to reduce nearly 20% of its total output for 2024 already.
• LNG is flowing above average with more than 17% inflow on top of the normal 30-day average. 
• The bullet point above shows that Europe is busy refilling and restocking its Gas stores with its eye on the next heating season. 
• Several benchmark futures are soaring with that active buying taking place in the Natural Gas futures markets. 

Natural Gas Technical Analysis: Turning into perfect storm

Natural Gas is finding some reasoning to jump higher, back to the $1.80 pivotal level. The move comes with finally the supply side seeing some disruption ahead for 2024 and which means a repricing (higher) is needed to factor this event in. It becomes very clear that should Gas prices want to move further up, any supply side disruption will be key to accomplish this. 

On the upside, Natural Gas is facing some pivotal technical levels to get back to. Once $1.80 is surpassed, the next stop is $1.99, – the level which, when broken, saw an accelerated decline. After that the blue line at $2.13 comes into view, with the triple bottoms from 2023. In case Natural Gas sees sudden demand pick up, possibly $2.40 could come into play. 

Keep an eye on $1.80, which was a pivotal level back in July 2020 and acts as a cap with a firm rejection earlier this Wednesday. Should the recent headlines start to fade, or more supply emerge in the markets from other firms or countries to fill the gap, $1.64 and $1.53 (the low of 2020) are targets to look out for. 

XNG/USD (Daily Chart)