Natural Gas uptrend continues as Israel cuts gas supply over Gaza turmoil
- Natural Gas prices jump to $3.63.
- The US Dollar eases as markets turn towards risk on.
- US Natural Gas prices could reach $4 if further supply hiccups emerge.
Natural Gas prices edge higher on renewed woes from the supply side. Strikes are set to take place in Australia after talks between the union workers and Chevron failed to lead to an agreement, cutting off nearly 10% of global LNG supply. Adding to this, the turmoil over the weekend in Israel and Gaza has led Israel to ask Chevron to shut down its activities due to safety concerns, which means gas supply to Europe could be further hit.
Meanwhile, the US Dollar (USD) pares part of Monday’s gains as the flight to safety eases. Investors were quite quick to assess the situation in Israel and Gaza. Markets were bracing for a possible spillover in the region to the bigger Oil-producing countries, though Saudi Crown Prince Mohammad bin Salman issued a statement late Monday urging both parties to come to the table instead of reverting to violence.
Natural Gas is trading at $3.55 per MMBtu at the time of writing.
Natural Gas news and market movers
- Temperatures in Europe are set to dip by roughly 10 degrees Celsius in the coming two weeks.
- Risk is being factored into Natural Gas price as the situation in Israel and Gaza remains very fragile, with possible spillovers in the broader Middle East region.
- Israel ordered the shutdown of the Tamar gas field run by Chevron Corp., citing safety concerns as fighting between its military forces and Hamas keeps escalating.
- The Israeli government has not informed the Egyptian government of any halt to the Leviathan gas field, one official said.
- Goldman Sachs sees marginal impact from Israel gas production disruption for now, according to a report.
Natural Gas Technical Analysis: Heading to $4
Natural Gas peaks again to a new year-to-date high near $3.6360, with the Relative Strength Index (RSI) in the daily chart reaching overbought levels. Although normally this is a signal that prices should start to ease, do not expect to see a peak yet. Several more headlines are coming in, signalling more supply crunches in the nearby future.
With the firm peak and breakthrough out of the trend channel, it will be crucial that the upper band of that same trend channel acts as support. There aren’t any significant resistance levels except for $3.65, the peak of January 17. From there, the high of 2023 near $4.3080 comes into play.
On the downside, the trend channel needs to act as support near $3.30. In case this breaks down again, Natural gas prices could sink 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 below $3 towards $2.85, near 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.
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