Natural Gas sprints higher with commodities in focus

Natural Gas price recover on Monday above $2.00.
Iran'S foreign ministry said nuclear weapons have no place in Iran’s nuclear doctrine.
The US Dollar Index eases with markets favoring risk assets over safe havens and cash.

Filip Lagaart FXStreet

Natural Gas (XNG/USD) is recovering ahead of the US trading session this Monday breaking $2.03 after tensions were nearly spill over between Israel and Iran in a direct confrontation. Despite the easing tensions over the weekend, Natural Gas prices are swinging higher on Monday thanks to the change of heart from investors. Both equities and commodities are back in favor with several analyst calls issuing a 10% to 30% drive-up in commodity prices to come with the biggest part for previous metals.

Meanwhile, the US Dollar Index (DXY) is turning green as well after outflows out of safe havens into risk assets. Apart from geopolitics, important US macro data may influence the Greenback’s valuation, as the US Gross Domestic Product (GDP) and the US Personal Consumption Expenditures (PCE) Price Index are set to be released this week. After the hot inflation print from two weeks ago, another higher-than-expected PCE figure could trigger expectations for a rate hike, rather than an interest rate cut as the first move from the US Federal Reserve (Fed).

Natural Gas is trading at $2.05 per MMBtu at the time of writing.

Natural Gas news and market movers: Commodities favored

European Gas prices are seeing a broader correction than US Gas prices, down over 3%. as tail risks deflating quickly in the Middle East and European Gas storages still reasonably well-stocked.
Interfax reports that Swedish Foreign Minister Tobias Billström said that the European Union plans to consider a ban on Russian Liquefied Natural Gas (LNG) imports as part of the 14th sanctions package.
BloombergNEF calculated that Europe should have its Gas storage back to 100% full by October. The report was released on Bloomberg onMonday.
Good news comes from the US Freeport LNG plant, where operations are restarting after being offline for nearly two weeks.

Natural Gas Technical Analysis: Not there yet for a breakout

Natural Gas is trading in a consolidation pattern here for the coming weeks. Certainly, there is room for some easing with the summer season ahead and less demand for Gas. Meanwhile, the recent uptrend since February keeps holding and could spark up at any moment if tensions in the Middle East flare up. While Europe is restocking for the next heating season, no big sell-off is expected in Gas prices with the supportive demand throughout the summer period from Europe.

On the upside, the blue line at $2.11, the 2023 low, is the level to watch. Next, the 100-day Simple Moving Average (SMA) at $2.12 becomes the main resistance level.

On the downside, the 55-day SMA around $1.88 should be a safety net. Below it, the green ascending trend line near $1.87 should support the ongoing rally since mid-February. If that level breaks, a dive to $1.60 and $1.53 would not be impossible.

Natural Gas: 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

FXStreet

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

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