Natural Gas steadies as lower demand from Europe drags prices down

• Natural Gas prices were unable to break above $1.90 this week. 
• Traders are throwing in the towel on bullish outlooks after European PMI data points to a subdued economic outlook.
• The US Dollar Index sprints higher with markets not buying into Fed’s soft-landing narrative. 

Natural Gas (XNG/USD) trades roughly flat on Friday and it is set to close off the week with a small gain on the US side. However, on the other side of the Atlantic, the European Gas market is set to close this week in the red as elevated reserves and a lackluster economic outlook in Germany push demand for Gas further down. 

Meanwhile, the DXY US Dollar Index, which gauges the US Dollar (USD) against a basket of six foreign currencies, is breaking above 104.00 on Friday. The mixture of China dropping the ball on its recovery, together with markets not buying into the three Fed rate cuts for 2024 is creating a cocktail in which the Greenback is winning twice. Investors do not see a reason for three rate cuts and a soft landing by the Fed because recent US economic numbers are still showing the economy is taking off, not landing, which questions the need for any rate cuts. 

Natural Gas is trading at $1.85 per MMBtu at the time of writing.  

Natural Gas news and market movers: European market leads the way

• The UN is holding a summit on Friday to discuss a forced ceasefire in Gaza. This could be a trigger for more downside risk in Natural Gas should a ceasefire take place.
• Russian Liquified Petroleum Gas prices are soaring as a result of the Ukraine drone strikes on several storage facilities. 
• India has refused to take in Oil coming from Russia in order to comply with US sanctions, Bloomberg reported on Wednesday. A domino effect could be extended into Gas deliveries as well, which would mean a squeeze in prices in the region should Russian Gas be refused. 

Natural Gas Technical Analysis: Consolidation phase 

Natural Gas prices are still consolidating with a pennant formation on the Daily Chart, formed by lower highs and higher lows since mid-February. With both buyers and sellers being pushed toward each other, a breakout could be due at any time. Seeing the current lackluster energy demand out of Europe, with its storage units still above average, a turn to the downside looks more likely than an upside breakout. 

On the upside, the key $2.00 level needs to be regained first. The next key mark is the historic pivotal point at $2.12, which falls broadly in line with the 55-day Simple Moving Average (SMA) at $2.05. Should Gas prices pop up in that region, a broad area opens up with the first cap at the red descending trendline near $2.27.

On the downside, multi-year lows are still 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, traders should look at $1.53 as the next supportive area. 

Natural Gas: Daily Chart