- Natural Gas hits another rock bottom level by hitting $1.85 earlier this Friday.
- Traders are sending Gas prices lower with pressure mounting on ending Biden’s Gas moratorium.
- The US Dollar Index eases and heads back to test 104 with a possible break towards the 103 region.
Natural Gas (XNG/USD) is having a meltdown this week, down over 14% for this week. The continuous decline comes with the probe into the LNG moratorium the Biden administration has put in place that asks for more paperwork and proof for building or starting up new Natural Gas exploitation in the US. Both the chairman, Senator Joe Manchin, of the Committee, and several Senate Republicans are now calling for this moratorium to be cancelled.
The US Dollar (USD), which is negatively correlated to Natural Gas, is showing signs of fatigue after it was able, earlier this week, to finally move away from the 200-day Simple Moving Average (SMA) at 103.61. The fatigue comes in the form of false breaks with US Dollar bulls unable to push the US Dollar Index above the next pivotal level, which is the 100-day SMA at 104.27. A bunch of false breaks could well trigger profit taking into Friday’s close, with possibly some US Dollar weakness at hand.
Natural Gas is trading at $1.90 per MMBtu at the time of writing.
Natural Gas market movers: Can Biden administration hold on to ban?
- Senate Republicans are accusing US President Joe Biden of picking a fight with Gas-rich states ahead of the elections.
- Deputy Energy Secretary David Turk defended the pause in new LNG projects in the Senate Hearing on Thursday by stating that the US has tripled its LNG exports over five years. This exponential growth comes with a threat and urges that the Department of Energy (DOE) gets time to assess the current situation and set out a roadmap for the next 30 years if the US wants to keep its title as world largest LNG exported, Deputy Turk said.
- Danielle Smith, head of the fossil fuel production in Alberta Canada, said that Canada is ready to ramp up its LNG exports in order to fill the gap for lost volumes because of the US pause in new export plants.
- European winter demand fades, and with Gas storages overall still above 60%, ample reserves to restock for the winter of 2024.
- Whilst the pause may face legal challenges it is unclear how lawmakers who oppose it can completely overturn it.
- The only way would be for opponents to pass legislation in both the Senate and the House of Representatives to strip the DOE's power to approve exports, giving all approvals to the independent Federal Energy Regulatory Commission (FERC), according to Reuters.
- Such a move would no doubt face much opposition in the Democrat-controlled Senate, however, making it unlikely to pass, continues the report.
- Bloomberg reports that in the last few months of 2023, former US President Donald Trump has received 10 times more money than his first challenger Nikki Haley, from the Energy Industry.
Natural Gas Technical Analysis: Off the lows, nothing more to get excited about
Natural Gas is facing a more substantial downturn and could be on its way to hit pre-Covid lows. Traders fear Biden’s current Gas-exporting moratorium could be lifted, leading to an influx of Natural Gas supply flooding markets. Set against demand which is expected to remain low or even lower, such an influx would tip the price down.
On the upside, Natural Gas is facing some pivotal technical levels to get back to. First, the clear break at $1.99 which saw an accelerated decline. Next is the blue line at $2.11 with the triple bottoms from 2023. In case Natural Gas sees sudden demand pick up, possibly $2.40 could come into play.
The gap lower at $1.85 this Friday is not helping the situation either. Although a gap-fill from the close of Thursday could still take place, keep an eye on $1.77, which was a pivotal level back in 2020. Should Biden’s moratorium be lifted, together with the additional supply from Canada, $1.64 and $1.53 (low of 2020) are targets to look out for.
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.
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