- Natural Gas prices are falling again in bloodred week.
- Gas demand in Europe sinks further as industrial production contracted more than expected in January.
- The US Dollar Index trades below 103.00 after failing to break higher on Tuesday.
On Wednesday, Natural Gas (XNG/USD) continues its downward trajectory, trading well below the $2.00 mark and extending the steep decline observed last week. Increasing selling pressure is evident from a purely technical standpoint, compounded by geopolitical factors that are not conducive to higher Gas prices. Data released on Wednesday indicates a larger-than-expected decline in European Industrial Production for January, signaling weak demand at a time when Gas consumption from households is diminishing with the onset of spring and summer.
Simultaneously, the US Dollar (USD) is weakening following a failed attempt to rally higher on Tuesday. Despite the US Consumer Price Index (CPI) affirming that inflation remains persistent, it was insufficient to propel the US Dollar Index (DXY) firmly above the 103.00 level. As a result, the DXY retreated towards the end of the US trading session, with the potential for further downside once Dollar bulls lose momentum.
At the time of writing, Natural Gas is priced at $1.75 per MMBtu.
Natural Gas market movers: Europe’s demand just got smaller
- Kimmeridge Energy Management Company, a prominent US Oil and Gas investor, has proposed a merger of its Texas gas unit with Silverbow Resources.
- Despite recent negative Industrial Production data emerging from Europe, speculators are driving up Futures contracts for the upcoming winter on bullish expectations.
- In the political arena, both former US President Donald Trump and current President Joe Biden have secured sufficient votes to become candidates for the upcoming November election. Their rematch, after four years, will hold significance, particularly regarding Trump’s previous commitments to achieving energy independence for the United States.
- Russian Gas exports are anticipated to increase by 13% this summer, although projections suggest that US sanctions may restrict this growth.
- In the Dutch Gas market, spreads between summer and winter contracts indicate a discount for summer contracts, enabling Europe to replenish its reserves ahead of the next heating season at a lower cost. This alleviates price pressures for European households.
- Despite recent developments, a tail risk persists in the Middle East due to the lack of progress in ceasefire negotiations between Gaza and Israel.
Natural Gas Technical Analysis: Prices being shot down
Natural Gas prices have significantly retreated from the crucial $2.00 mark, a pivotal level in its previous upward trajectory. The increasing downward trend of multiple Moving Averages (SMA) suggests that Gas prices are firmly entrenched in a downtrend and are poised to test the 2024 low at $1.60. This development bodes well for households, who stand to benefit from more affordable Gas prices.
To the upside, reclaiming the key $2.00 level is the first step. Subsequently, the historic pivotal point at $2.12, coinciding with the 55-day SMA at $2.13, represents a significant resistance zone. A potential breakout in this region would open up a broader area of resistance, with initial resistance at the red descending trend line around $2.40.
On the downside, multi-year lows are within close proximity, with $1.65 serving as the primary support level. Monitoring this year’s low at $1.60 is crucial, with further downside potential towards $1.53 in the event of a new yearly low being established.
