Natural Gas at nine-month high despite soft weather forecasts for Europe

Natural Gas prices are going against the headlines coming out this Friday pointing to a mild start for October with initial demand for gas from households to be delayed towards mid-October, triggering a slight drop in demand. Traders sent the gas prices soaring as the EU will need to scramble to get those last cubic feets of gas in order to have the strategic reserves filled to the brim ahead of fall and winter. Expect to possibly see some more price increases to come should more negative headlines on supply hit the wires. 

The US Dollar (USD) is trying to eke out another weekly gain, though this might be a close call to the final minute. While the US Dollar Index has closed each week near the high of that same week over the past ten weeks, that does not look to be the case for this week. With the United Auto Workers (UAW) union strike continuing, more independent workers joining the picket lines, and a US federal government shutdown expected to start this weekend, things are starting to look grim for the Greenback.

Natural Gas is trading at $3.06 per MMBtu at the time of writing.  

Natural Gas news and market movers

• Asian LNG spot price hits a 7-month high on rising local demand and possible lingering supply issues towards Europe. 
• Weather reports show a mild start of October with most parts of Europe in no need of cranking up the home heaters. This already helps offset the current diminished gas inflow from Norway to Europe.
• European gas markets remain tight with the slightest disruption or reopening of a gas field triggering a price move. This sensitive environment is expected to remain for the bigger part of winter.
• The Virginia Gas Project in South Africa  has received a positive environmental authorization for the Phase 2 Gas Project, Renergen says in a regulatory filing.

Natural Gas Technical Analysis: low-hanging fruit

Natural Gas has breached out of its bullish triangle and is currently trading above $3. Much more upside might be limited though as the current longer-term ascending trendline barriers are still in play, which would limit the upside to $3.40. Meanwhile, European gas demand could remain subdued due to the warmer weather outlook for October and gas storage ahead of schedule. 

As mentioned, the pivotal level near $3.07 has been broken to the upside. This level needs to hold now as a new floor, squeezing prices higher. With respect of the ascending trend channel, the upside looks limited toward $3.30-$3.40 to test the upper barrier. 

On the downside, the newly formed floor at $3.07 should act as support together with the psychological effect of $3 as a big figure. In case demand abates further, or more supply out of Norway comes back online, expect to see an initial drop back to the green ascending trendline near $2.95. Should that give way, $2.80 is an area with two moving averages (the 55-day and the 100-day) and the lower barrier of the trend channel that could incentive bulls to catch any falling price action. 

XNG/USD (Daily Chart)