- On Monday, Natural Gas prices are stabilizing in both US and European trading sessions.
- Traders are showing interest in Gas contracts, particularly in Spain, where gas prices indicate a potential shortage.
- Despite a lackluster performance last week, the US Dollar Index is finding significant support around the 105.00 mark.
Natural Gas (XNG/USD) shifts its trajectory on Monday, diverging from earlier concerns of a looming global recession. This reversal is primarily driven by developments in Spain, where local gas prices surpass the benchmark European prices. Spain’s reliance on inflows from other countries, coupled with its limited storage facilities compared to nations like France or Germany, amplifies the significance of this shift.
Meanwhile, the DXY US Dollar Index continues its upward momentum on Monday following the positive sentiment from the US Jobs Report released on Friday. The report exceeded expectations with an outstanding performance of 303,000 jobs added, surpassing the anticipated 200,000. Additionally, the US 10-year benchmark rate witnessed a notable increase of over 20 basis points last week, signaling a substantial reversal in expectations for the first rate cut.
At the time of writing, Natural Gas is priced at $1.93 per MMBtu.
Natural Gas news and market movers: Canary in the coal mine
- Interconnectedness between the Carbon Emission and Gas markets poses lingering spillover risks. Traders are reducing their exposure to Carbon, signaling potential recession risks in the energy sector. Companies reliant on energy consumption purchase Carbon Emission rights, and a decline in such purchases may foreshadow an industrial production slowdown.
- President Joe Biden’s ban on new US Gas exports is beginning to impact states. Pennsylvania Governor Josh Shapiro (Democrat) has urged Biden to reverse the policy, citing the risk of losing the swing state in the 2024 Presidential Election, according to Bloomberg.
- TotalEnergies is set to expand its gas production in Texas after acquiring a 20% stake in Lewis Energy Group, which holds Gas mining leases in Dorado, as reported by Dow Jones.
- Bloomberg indicates a decrease in Natural Gas supplies, with Egypt being a significant contributor. Egypt plans to suspend gas exports over the summer to redirect resources inland, meeting the rising energy demand for cooling purposes.
Natural Gas Technical Analysis: Rates versus Energy
Natural Gas prices face renewed challenges, with the primary concern being the surge in US yields. The US 10-year benchmark rate witnessed a significant increase of over 20 basis points last week, contrasting with other major economies where central banks are either cutting rates or have already done so. This divergence in interest rates places pressure on the US economy relative to the rest of the world and could indicate a potential slowdown. Even if the US economy continues to perform well, higher rates are likely to dampen growth, resulting in reduced demand for Natural Gas.
On the positive side, reclaiming the key level of $1.97 is essential before attempting to surpass last week’s peak at $2.00. The next significant milestone is the historical pivotal point at $2.13. If Gas prices breach this region, it could lead to broader opportunities, with the first resistance at the red descending trend line around $2.21.
Conversely, multi-year lows at $1.60 remain within close reach, with $1.65 serving as the initial support level. If these levels are breached, traders should monitor $1.53 as the subsequent critical support zone.
