Natural Gas retreats as geopolitical tensions ease

• Natural Gas price retreats on Monday on Iran’s communication. 
• Iran'S foreign ministry said nuclear weapons have no place in Iran’s nuclear doctrine.
• The US Dollar Index eases with markets favoring risk assets over safe havens and cash. 

Natural Gas (XNG/USD) retreats from its last week’s peaks near $2.03 after tensions were nearly spill over between Israel and Iran in a direct confrontation. However, the retaliation from Israel on Iran was mild, which already offered markets a sigh of relief on Friday when US equities almost erased an earlier 2% decline before the US opening bell. With new easing communication from Iran on Monday, investors are heading back into equities with the idea that any further escalation will not be at hand any time soon. 

Meanwhile, the US Dollar Index (DXY) is weakening on outflows out of safe havens into risk assets. Apart from geopolitics, important US macro data may influence the Greenback’s valuation, as the US Gross Domestic Product (GDP) and the US Personal Consumption Expenditures (PCE) Price Index are set to be released this week. After the hot inflation print from two weeks ago, another higher-than-expected PCE figure could trigger expectations for a rate hike, rather than an interest rate cut as the first move from the US Federal Reserve (Fed). 

Natural Gas is trading at $1.98 per MMBtu at the time of writing.  

Natural Gas news and market movers: Tail risk deflates

• European Gas prices are seeing a broader correction than US Gas prices, down over 3%. as tail risks deflating quickly in the Middle East and European Gas storages still reasonably well-stocked.
• Interfax reports that Swedish Foreign Minister Tobias Billström said  that the European Union plans to consider a ban on Russian Liquefied Natural Gas (LNG) imports as part of the 14th sanctions package.
• BloombergNEF calculated that Europe should have its Gas storage back to 100% full by October. The report was released on Bloomberg onMonday. 
• Good news comes from the US Freeport LNG plant, where operations are restarting after being offline for nearly two weeks. 

Natural Gas Technical Analysis: Expect risk to linger while easing

Natural Gas is trading in a consolidation pattern here for the coming weeks. Certainly, there is room for some easing with the summer season ahead and less demand for Gas. Meanwhile, the recent uptrend since February keeps holding and could spark up at any moment if tensions in the Middle East flare up. While Europe is restocking for the next heating season, no big sell-off is expected in Gas prices with the supportive demand throughout the summer period from Europe. 

On the upside, the blue line at $2.11, the 2023 low, is the level to watch. Next, the 100-day Simple Moving Average (SMA) at $2.12 becomes the main resistance level.

On the downside, the 55-day SMA around $1.88 should be a safety net. Below it, the green ascending trend line near $1.87 should support the ongoing rally since mid-February. If that level breaks, a dive to $1.60 and $1.53 would not be impossible. 

Natural Gas: Daily Chart