- Natural Gas prices are soaring ahead of the US trading session.
- Traders see the risk of overcrowded demand for cheap European Gas contracts.
- The US Dollar Index rallies above 104.00 and sets a three-day high.
Natural Gas (XNG/USD) is surging beyond the $1.89 mark, reaching a two-week high. Traders are optimistic about further upside potential, especially with the European Gas trading market experiencing increased activity. The market has become crowded, drawing the attention of numerous foreign traders, notably from Asia, which is actively engaging in purchasing contracts following recent multi-year lows in prices.
In the European trading session, the US Dollar (USD) is making a robust comeback, reaching a three-day high and exerting its influence on the markets. As the second reading of the US Gross Domestic Product (GDP) approaches, the Greenback is gaining strength against most major peers. The initial trigger for the USD’s resurgence on Wednesday was a risk-off sentiment prevailing in Asia.
At the time of writing, Natural Gas is valued at $1.89 per MMBtu.
Natural Gas market movers: Cat’s out of the bag for European gas trading
The dip in European Gas prices has attracted interest from various regions worldwide, potentially driving prices upward in Europe and creating a ripple effect in global Gas markets.
Projections indicate an anticipated 8.2% increase in China’s Gas imports for the current year. Buyers are taking advantage of the current affordability and purchasing more Gas than required.
Contrarily, Turkey has witnessed a decline of 8% in Natural Gas imports during 2023, with Russia standing out as its primary supplier.
In a proposal presented this Wednesday morning, EU President Ursula Von Der Leyen suggested utilizing frozen Russian assets to provide support for Ukraine.
Natural Gas Technical Analysis: Heading to $2
The European Natural Gas market is gearing up for a warm summer as an increasing number of market participants, particularly buyers from Asia, step into the trading arena. The attraction lies in Europe’s Gas market, which currently boasts multi-year low prices, coupled with the EU’s instituted price cap safeguarding households from the impact of reduced Gas supplies from Russia. Despite Europe’s apparent readiness for replenishment before the next heating season, there exists a potential for volatile spikes during the summer.
On the positive side, Natural Gas is encountering key technical levels on its path to recovery. The immediate target is $1.99, a level that witnessed accelerated declines when broken during the downward movement. Following that, attention turns to the green line at $2.13, marked by triple bottoms from 2023. If there’s a sudden surge in demand, $2.40 could become a relevant consideration.
Conversely, potential downside targets include $1.64 and $1.53 (the low of 2020). A further decline could materialize if global growth contracts, leading to reduced demand. The equation is complicated by efforts from both the US and Canada to increase Natural Gas mining volume, potentially tilting the scales towards an oversupplied market with the prospect of further downward pressure on prices.
