Natural Gas sinks to pivotal level as China’s demand slumps

• Natural Gas extends its decline and sinks to $2.56 on Monday. 
• Investors see China cutting LNG imports after prices peaked above $3.0 in June. 
• The US Dollar index retraces after the Euro outpaced the Greenback on Monday, offering support to XNG/USD. 

Natural Gas price (XNG/USD) edges lower and sinks to $2.56 on Monday, extending its losing streak for the fifth day in a row. The move comes on the back of China cutting its Liquified Natural Gas (LNG) imports after prices rose above $3.0 in June. It seems that the demand and hunger for LNG in China is not that big once prices are heating up, while European Gas prices are moving higher after a local temperature surge and the energy demand rose again. 

Meanwhile, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, retraces as the Euro (which represents nearly 57.6% of the Index) outpaces the Greenback after the French government elections held on  Sunday, with a win for the far right not being that convincing and still all possible outcomes on the table ahead of the second round vote on July 7.  Traders are also gearing up for a crammed US economic calendar, with the US Jobs Report on Friday as the cherry on the cake. 

Natural Gas is trading at $2.56 per MMBtu at the time of writing.  

Natural Gas news and market movers: Europe is hot

• Gas demand in Europe is surging locally. Several regions are already experiencing high temperatures, and energy consumption from air conditioning is spiking to withstand the heat, Reuters reports. 
• Bloomberg reports that China’s LNG imports fell for the first time in more than a year, by 6.2% compared to the same month last year. 
• Germany is topping over 80% of its Ggas storage capacity by hitting 81%. The overall EU gas storage capacity is at 77%, according to Gas Infrastructure Europe (GIE).

Natural Gas Technical Analysis: Running ashore

Natural Gas price is hitting solid ground with a double layer of support coming from the 100-day Simple Moving Average (SMA) and the 200-day SMA. The steep decline in the price comes with the main buyer, China, having eased its recent Gas imports for June after Gas prices rallied the month before. Add the steady Gas import flow in Europe, with Germany already at 81% in reserves ahead of winter, and it could be that this direction has not yet reached the end of the line. 

The pivotal level near $3.08 (March 6, 2023, high) remains key resistance after its false break last week, which is still 20% away. In addition, the red descending trendline in the chart below at $3.10 will also weigh on this area as a cap. Further up, the fresh year-to-date high at $3.16 is the level to beat. 

On the downside, the 200-day Simple Moving Average (SMA) acts as the first support near $2.54. Should that support area fail to hold, the next target could be the pivotal level near $2.13, with interim support by the 55-day SMA near $2.58 and by the 100-day SMA at $2.25. 

Natural Gas: Daily Chart