- Natural Gas prices retreat from $3.70 as tension builds around possible invasion in Gaza region.
- The US Dollar reclaims its status as King Dollar as US yields flirt with 5% again.
- Natural Gas prices could jump rapidly once reports are issued that Israel has started its ground offensive.
Natural Gas is retreating a touch as reports hit the wires that a ceasefire deal is in progress, after pushing higher earlier as Israel confirms it has made a second entry across the Gaza border. Overnight US Pentagon officials confirmed that US soldiers have been attacked 12 times in Iraq and 4 times in Syria in the past week by Iran-affiliated groups. With tensions reaching a new high, gas prices are trading alongside that elevation.
Meanwhile, the US Dollar (USD) is set to lock in a new week of gains after a small negative dip last week. Although the topside looks to remain locked for further upside in the US Dollar Index (DXY), expect to see the Greenback trade at elevated levels ahead of the Federal Reserve decision next week. The Personal Consumption Expenditures – Price Index results out on Friday, will shed a bit more light on how inflation is still declining or soaring again in the US.
Natural Gas is trading at $3.69 per MMBtu at the time of writing.
Natural Gas news and market movers
- At the US opening bell reports and headlines are coming out that a ceasefire deal is in the making in the Middle East.
- European and US gas prices soar substantially as an Israeli invasion in the Gaza region over the weekend could materialize.
- European natural gas prices soared near €50 a megawatt-hour as traders are on the lookout for further news on tensions in the Middle East. The risk premium to be factored in for a proxy war in the region means a substantially elevated gas price.
- Despite the recent drops in temperatures, EU gas storages remain near 99% full.
- EDP has plans to convert Abono II in Spain from a coal to a gas-fired power plant. The conversion should be done by mid 2025.
- Russian gas still accounts for about 10% of France’s natural gas supply, French Energy Transition Minister Agnes Pannier-Runacher said.
- This evening at 17:00 GMT the weekly Baker Hughes Gas Rig Count is due to come out. Previously it was at 118 and is still at the lower levels of 2023.
Natural Gas Technical Analysis: Ceasefire just a soft patch
Natural Gas price has met its first big price target at $3.65 after a steep ascent in the past few days. Day by day more headlines come out that are pointing to a major Israeli ground assault going ahead into Gaza at any moment. Once that news hits the wires, expect to see another firm jump higher that could even print a new high for 2023 near $4.33
From a purely technical perspective, gas prices broke back above the topside trend line identified earlier, near $3.37, on Wednesday. Expect to see a continuation higher from here with the next level on the upside at $3.63. Should a big ground invasion take place and several countries start to choose sides, expect a very quick squeeze higher to $4.33, the high of 2023.
On the downside, the trend channel should try to act as support again, near $3.37. Natural Gas prices could fall to $3.07, with that orange line identified from the double top around mid-August. Should the drop become a broader sell-off, prices could sink to $3.03, at the 55-day Simple Moving Average.
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.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD consolidates below 0.6600; remains close to multi-month low
AUD/USD extends its consolidative price move on Tuesday and holds steady above its lowest level since August 8 touched last week amid mixed cues. Concerns about US President-elect Donald Trump's protectionist policies, the disappointment over China's fiscal stimulus and the underlying strong bullish sentiment surrounding the USD act as a headwind for the pair.
USD/JPY ticks lower amid intervention fears; downside potential seems limited
USD/JPY edges lower during the Asian session on Tuesday amid fears that Japanese authorities might intervene in the markets. Doubts over the BoJ's ability to hike rates again, fears that the US President-elect Donald Trump might again hit Japan with protectionist trade measures and elevated US Treasury bond yields should cap the JPY.
Gold price struggles to lure buyers amid elevated US bond yields, bullish USD
Gold price hangs near a one-month low touched on Monday and seems vulnerable below the 50-day SMA. Expectations that US President-elect Donald Trump's expansionary policy will boost inflation and force the Fed to delay its easing cycle remain supportive of elevated US Treasury bond yields. This favors the USD bulls and validates the negative outlook for the XAU/USD.
How high can Bitcoin go? Prediction markets suggest $100K
Bitcoin is consistently setting new record highs on Monday after breaking above $89K. The continued uptrend has led asset managers like Bernstein to urge investors to consider adding Bitcoin exposure to their portfolios.
Five fundamentals: Fallout from the US election, inflation, and a timely speech from Powell stand out Premium
What a week – the US election lived up to their hype, at least when it comes to market volatility. There is no time to rest, with politics, geopolitics, and economic data promising more volatility ahead.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.