Natural Gas looks set for fresh year-to-date lows as technical indicators point south

• Natural Gas price is back into its selling modus, accumulating three consecutive sessions of losses. 
• Gas demand in Europe sinks further as industrial production contracted more than expected in January.
• The US Dollar Index trades below 103.00 after failing to break higher on Tuesday. 

Natural Gas (XNG/USD) trades well below $2.00 on Wednesday, extending its steep decline last week. More and more selling pressure is accumulating from a pure technical point of view, while geopolitical factors are not falling in favor of higher Gas prices either. Data published on Wednesday showed that European Industrial Production fell more than expected in January, a bad sign for demand at a time when Gas consumption from households is fading as well with spring and summer just around the corner. 

Meanwhile, the US Dollar (USD) is clinging on to its weekly gain despite the failed attempt to jump higher on Tuesday. The US Consumer Price Index (CPI), though clearly proving that inflation is still sticky, was not enough to push the US Dollar Index (DXY) firmly above 103.00 and saw it retreating at the end of the US trading session, with risk of more downside once Dollar bulls run out of belief. 

Natural Gas is trading at $1.78 per MMBtu at the time of writing.  

Natural Gas market movers: Seasonality goes against

• Former US President Donald Trump and current US President Joe Biden both secured enough votes to be the candidates and will have a rematch after four years in November to see who will become the next President. This will be important in terms of Trump’s former pledges for the US to become energy independent.
• Russian Gas exports are set to rise by 13% this summer, though US sanctions are expected to limit this projection.
• Spreads between summer and winter contracts on the Dutch Gas market show a discount for the summer contracts, making it less expensive for Europe to restock ahead of the next heating season. This means less price pressure for European households. 
• A tail risk is still present in the Middle East with still no breakthrough in ceasefire talks between Gaza and Israel.  

Natural Gas Technical Analysis: limited tail risk means downturn

Natural Gas prices are trading substantially lower, away from that $2.00 marker which was crucial in its road upwards. Instead, with more and more Moving Averages (SMA) trending lower, it is nearly undeniable that Gas prices are stuck in a downturn and will soon test the low of 2024 at $1.60. This is good news for households,  which are set to benefit from cheaper Gas. 

On the upside, the key $2.00 level needs to be regained first. The next key level is the historic pivotal point at $2.12, which falls in line with the 55-day SMA at $2.13. Should Gas prices pop up in that region, a broad area opens up with the first cap at the red descending trend line near $2.40.

On the downside, again multi-year lows are nearby with $1.65 as the first line in the sand. This year’s low at $1.60 needs to be kept an eye on as well. Once a new low for the year is printed, keep an eye on $1.53 as the next supportive area. 

XNG/USD (Daily Chart)