Natural Gas drops as supply ample during frosty weather

• Natural Gas trades near $2.67, continuing a steep decline from Wednesday.
• Traders see ample amounts of supply, despite frost temperatures in Europe and China. 
• The US Dollar steady above 102 ahead of US CPI numbers.  

Natural Gas (XNG/USD) is unable to bank on the current elevated geopolitical tensions and winter in the Northern Hemisphere. While Israel is facing tribunal repercussions from a possible genocide accusation out of South Africa, negative temperateres across Europe, China and other parts of the Northern hemisphere are eating into Gas reserves. Supply is flowing, however, and ships are still making ports, despite longer routes to circumvent the Red Sea passage. 

Meanwhile, the US Dollar (USD) is gearing up for a spike in volatility with the US inflation report due to be released this Thursday. Markets are positioned for quick rate cuts from the US Federal Reserve with expectations that the US Consumer Price Index (CPI) will continue its disinflationary path. Substantial US Dollar weakness is expected on the back of all this, which could support Natural Gas prices. 

Natural Gas is trading at $2.67 per MMBtu at the time of writing.  

Natural Gas Market Movers: Not cold enough

• European Gas prices are sinking with industrial demand not picking up at all and stockpiles still very much equipped to face a longer period of low temperatures on the continent.
• Several Norwegian Oil and Gas companies have launched projects for mining. Expectations are that nearly 40 to 50 wells will come online this year, from the 34 last year. 
• German Gas storages drop to 88% while European Gas storage is still near 82%.
• This Tuesday the first hearings started in the United Nations Tribunal for Genocide against Israel after South Africa launched a formal complait with the tribunal. 

Natural Gas Technical Analysis: Close but no cigar

Natural Gas was on a tear earlier this week, nearing $3 finally. The price action plunged back to $2.70, however, after markets saw no supply issues and lacklustre demand from the industry for the commodity. Expect to see still fairly muted reactions to the upside, unless a supply hiccup could emerge at one point out of the Middle East. 

On the upside, Natural Gas is facing all the important Simple Moving Averages (SMA) as resistance levels to the upside. First up, nearby is the 200-day SMA near $2.75. Next up is the 55-day SMA at $2.85. Last but not least is the 100-day SMA at $2.95, near $3.

One big element that is always returning when it comes to Natural Gas, is that there is always an ample amount of supply. Each initial bullish reaction is being backtracked thereafter with the realisation that more supply is present. In that case, expect to see a continuing drop lower to $2.60 with a test at the low of December near $2.20 as not unthinkable. 

XNG/USD (Daily Chart)