Natural Gas drops 2% with shipping firms taking detour

• Natural Gas drops back below $2.50 in a reversal trade.
• Companies and governments defuse Red Sea tensions overnight with interventions. 
• The US Dollar steady after Greenback appreciates over 1% against the Japanese Yen. 

Natural Gas (XNG/USD) is completely reversing on Tuesday, giving up earlier gains from Monday. The full paring back of those gains comes as both shipping companies and several main governments have taken measures to detour or defuse tensions in the Red Sea after Houthi rebels again attacked a ship in the region, on Monday. Shipping companies such as Maerks, BP and MSCI have cancelled all travelling in the region and are deviating their fleet via other, longer, routes, while a UK-Canadian-France-US task force will patrol the area to secure safe passage. 

Meanwhile, the US Dollar (USD) is finding a floor which halts its decline in the US Dollar Index (DXY). In early morning trading this Tuesday, the Bank of Japan held a monetary policy meeting.  Bank of Japan (BoJ) governor Kazuo Ueda delayed the timing again on the normalisation of the Bank’s monetary policy, which made the Japanese Yen devalue by over 1% against the US Dollar.

Natural Gas is trading at $2.46 per MMBtu at the time of writing.  

Natural Gas Market Movers: defusing quick

• The US Secretary of Defense Lloyd Austin, has set up a task force with the UK, Canada and France to create a naval task force to secure safe passage in the region.
• All big shipping transporters meanwhile have taken measures to avoid the Suez Canal and Red Sea passage.
•  European industrial demand remains subdued for the coming months, with no chunky declines in overall Gas storages in the EU.
• Norwegian based company Equinor has signed a deal with Germany to supply SEFE with 10 billion cubic metres of Natural Gas from January 1st 2024 until 2034. The amount accounts for roughly one third of German industrial demand. 

Natural Gas Technical Analysis: Proof that governments want to keep Gas prices low

Natural Gas jumping above $2.50 saw red flags popping up all over European government desks, even stretching all the way up into Washington to the White House. It did not take long for the US Secretary of Defense Lloyd Austin to set up a task force that will monitor and patrol the Red Sea in order to fence off any other Houthi rebel attacks. Meanwhile shipping companies are rerouting their fleet, avoiding any supply issues and quickly defusing the sudden uptick in Gas prices. 

On the upside, Natural Gas could still try and return to the purple line near $2.60 as the first hurdle, should another front of bad geopolitical news occur. Next, the 200-day Simple Moving Average (SMA) at $2.74 will act as a resistance, which if breached will allow Gas prices to soar to $3.00 and the 100-day SMA nearby. 

With the dust quickly settling on this blip of macroeconomic tensions in the Red Sea, Gas prices are back retreating towards $2.20, and the low of June. Firmer support should come in near $2.10, April’s low, at the yellow supportive line. 

XNG/USD (Daily Chart)