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Natural Gas price to turn lower as Russian LNG-exports to EU pick up - FXStreet

FXStreet · last updated August 31, 2023 – 3:53 AM

Natural Gas to face selling pressure as demand fades

- Natural Gas is set to fall as demand remains tepid and stockpiles high.
- The US Dollar is under pressure after weak US data ahead of the jobs report.
- Expect a sideways to lower gas price as supply issues start to soothe.

Natural Gas has jumped substantially this week after Chevron received notice of strikes to take place at the start of September in several important LNG terminals in Australia. As the week progresses, another local exporter was able to broker a deal and avoid any future strike actions. This opens the door for Chevron to strike a deal as well, which would mean that any supply issues are to be limited in the near future.

Meanwhile, the demand side is staying steady to lower as the European bloc is way ahead of its target for this winter in filling up the strategic gas storages. The European bloc is committed to shun away from fossil fuels by 2027 out of Russia. However, EU countries have bought a record 52% of all cubic metres of LNG that Russia has exported this year.

At the time of writing, Natural Gas is trading at $2.926 per MMBtu.

Natural Gas news and market movers

- The Energy Information Administration (EIA) is due to publish the weekly Natural Gas Storage Changes for this week at 14:30 GMT. In line with recent headlines, another build is expected from 18 to 29 billion cubic feet.
- Oman LNG has signed a new deal with Shell and OQ to deliver LNG.
- China’s LNG consumption for July has risen 9.6% year-on-year.
- The recent batch of weaker data from the US, with a lower than expected US Gross Domestic Product and a substantial decline in US JOLTS job openings, could point to less LNG demand in the coming quarters.
- European gas storage is at 93% and saw further stockpile growth this week.
- Australian local exporter Woodside Energy Group Limited has reached a breakthrough agreement with unions. This could mean that Chevron might broker a deal as well soon and still alleviate any possible strike actions at the start of September.
- Tropical storm Idalia is heading over Georgia as it weakens to a Category 1 hurricane.
- All eyes remain on the market moving US jobs report on Friday.

Natural Gas Technical Analysis: little by little

Natural Gas has been on a tear this week and starts to face a few headwinds. With the demand side not picking up any further and the supply side possibly not as tight as first foreseen, a small rebalancing of the gas price could be at hand. Expect to see some profit taking into the rally of this week, which means that the $3 handle looks out of reach.

On the upside, $3 is still the level to watch once Natural Gas prices can reclaim $2.9. Should prices recover, look for a close above $2.935, the high of August 15, in order to confirm that demand is picking up again. More upside toward $3 and $3.065 (high of August 9) would be targets or levels to watch.

On the downside, the trend channel has done a massive job underpinning the price action. Aside from one small false break, ample support was provided near $2.60. The 55-day Simple Moving Average (SMA) needs to give that much needed support at $2.69 ahead of the ascending trend channel at $2.61. Any falling knives can still be caught by the 100-day SMA near $2.55.

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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Natural Gas price to turn lower as Russian LNG-exports to EU pick up - FXStreet

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