Natural Gas trades sideways as Israeli-Gaza tensions ease and gas storages remain full

• Natural Gas prices are steady in the range between $3.20 and $3.70.
• The US Dollar tries to recover losses from Tuesday’s meltdown.
• Natural Gas prices are expected to remain stable as both demand and supply are steady.

Natural Gas (XNG/USD) is starting to form a pure technical range on the charts as both supply and demand are showing signs of easing. On the demand side, positive China data could point to a quicker recovery and thus a pickup in demand from Asia’s biggest gas consumer. On the supply side, no real production hiccups or bottlenecks that could distort near-term flows are at hand. 

Meanwhile, the US Dollar (USD) remains weak after the sharp decline seen on Tuesday, when US inflation data revealed further abating price pressures. With the US Federal Reserve likely done hiking, bets are rising on when the first cut will materialise, erasing the positive rate differential support for the Greenback against most major peers. Traders will keep looking for clues with the US Dollar Index (DXY) at risk to decline further. 

Natural Gas is trading at $3.35 per MMBtu at the time of writing.  

Natural Gas market movers: steady sideways

• European Natural Gas prices are declining for a third consecutive day as robust deliveries to the bloc are avoiding pulling gas out of the storages, which are still 99% full. 
• A mild start of the fall and winter season in Europe has given the bloc a bigger advantage to get through the colder period. 
• The EU has issued further rules on Methane restrictions, where Liquified Natural Gas (LNG) could see more demand come in as LNG is a greener alternative to Methane use and is exempt from any emission reductions rules. 
• Around 15:30 GMT, the Energy Information Agency (EIA) will issue the weekly US gas storage numbers for last week. Expectations are for an increase of 40 billion cubic feet, less than the  79 billion cubic feet seen a week earlier.  Estimations range from 33 billion to 49 billion.

Natural Gas Technical Analysis: finding tranquillity 

Natural Gas has found some steady ground after a rather volatile October, when the Israel-Gaza tensions were throwing Gas traders left and right. With headlines starting to fade in the region, and the EU not facing substantial shortages for this winter, it looks that Gas prices might trade in this range for some time. Unless a catalyst that either triggers substantial shortage or oversupply, a breakout isn’t expected in the coming days. 

Should a proxy war in the Middle East develop, $3.64, will be the level to watch for as prices would soar. A risk premium would be priced in if Iran, Saudi Arabia and other countries in the region started mobilising forces. In such a case, even a quick sprint to $4.33, the high of 2023, could be expected. 

On the downside, the 55-day Simple Moving Average (SMA) is doing its work near $3.20, based on the peak seen on October 4. In case this level is unable to hold any selling pressure, expect to see prices going down towards the orange line, from the double top in August near $3.06. That level should be able to act as the last line of defence before gas prices retreat below $3.

XNG/USD (Daily Chart)