Natural Gas flat with traders seeing some slight upside potential

• Natural Gas prices are flat halfway through the European session but with upside potential. 
• Traders see the risk of overcrowded demand for cheap European Gas contracts. 
• The US Dollar Index rallies above 104.00 and sets a three-day high. 

Natural Gas (XNG/USD) is trading back above $1.80 after a two-day winning streak. Traders are seeing more room for some upside with the European Gas trading market becoming very crowded. Due to the recent multi-year low in prices, several foreign traders are making their way into the European Gas trading market, with Asia being very active in buying up contracts. 

The US Dollar (USD) is delivering a gut-punch to the markets by stretching to a three-day high in the European trading session. Ahead of the second reading of the US Gross Domestic Product (GDP), the Greenback is making its way back up against most major peers. Risk-off sentiment in Asia was the main trigger for the start of the US Dollar strength this Wednesday. 

Natural Gas is trading at $1.84 per MMBtu at the time of writing.  

Natural Gas market movers: Europe’s LNG markets get crowded

• Recent declines in European Gas prices have spurred other parts of the world into buying. This could push prices higher in Europe, and spillover into global Gas prices. 
• China’s Gas imports are expected to climb by 8.2% this year. Buyers are buying more Gas than needed, especially at current cheap prices.
• Turkey’s Natural Gas imports have declined by 8% in 2023, with Russia being the biggest supplier.
• This Wednesday morning EU President Ursula Von Der Leyen proposed to start using the frozen Russian assets for Ukrainian support. 

Natural Gas Technical Analysis: European Gas market getting crowded

Natural Gas in Europe is set to face a hot summer with more and more market participants entering the bloc’s Gas trading market. All new additions are buyers, mainly from Asia, interested in the European Gas market with at the moment multi-year low prices and the guaranteed price cap the EU has put in place to protect households from rising Gas prices after Russia decreased its supplies to Europe. Although Europe looks well equipped to refuel ahead of the next heating season, the risk of some volatile spikes could be on the horizon over the summer period. 

On the upside, Natural Gas is facing some pivotal technical levels to get back to. The next step is $1.99, – the level which, when broken on the way down, saw an accelerated decline. After that, the green line at $2.13 comes into view, with the triple bottoms from 2023. If Natural Gas sees sudden demand pick up, $2.40 could come into play. 

On the downside, $1.64 and $1.53 (the low of 2020) are targets to look out for. Another leg lower could come if global growth starts to shrink and there is less demand. Add to that equation both the US and Canada trying to free up more volume of Natural Gas mining, and the scale could quickly tip into an oversupplied market with more downside prices at hand. 

XNG/USD (Daily Chart)