Natural Gas holds above $3 as Europe faces global supply disruptions

• Natural Gas recovers a touch on Friday after its technical correction on Thursday. 
• European Natural Gas futures trade close to a six-month high as supply issues mount. . 
• The US Dollar Index trades higher, driven by a weaker Euro and Japanese Yen. 

Natural Gas price (XNG/USD) recovers slightly on Friday after breaking below a key support level at $3.08 on Thursday. The risk for more downside comes with the political turmoil in Europe, particularly in France, that is causing distress in the European sovereign bond markets, hurting the growth potential for the bloc. On the other hand, a string of court rulings in favor of several big industrial companies against Russian Gas exporter Gazprom and supply issues in Australia are pushing up European prices close to a six-month high. 

Meanwhile, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, is trading in the green with help from its two main contributors accounting for 70% of the DXY: the Euro (EUR) and Japanese Yen (JPY). With a rather slim economic calendar ahead, only the University of Michigan Sentiment could bring some US Dollar weakness. However, the recent decline in the Consumer Price Index numbers (CPI) and Producer Price Index (PPI) numbers makes it more difficult for consumer sentiment to take a significant hit. 

Natural Gas is trading at $3.04 per MMBtu at the time of writing.  

Natural Gas news and market movers: Torn again

• Supply issues in Australia persist ahead of the weekend, with the Wheatstone offshore plant from Chevron still fully shut down. Repairs will take longer than expected, Reuters reports. 
• European Gas prices saw a similar pattern, where the rally got snapped this week, while traders look to Egypt as the country keeps hoarding Liquified Natural Gas (LNG) in order to meet summer heat season and energy demand. 
• The EIA (Energy Information Administration) reported on Thursday that the Natural Gas Storage Change was a build of 74 billion cubic feet of natural gas against 98 billion cubic feet last week. 

Natural Gas Technical Analysis: Europe caught 

Europe’s performance will be key in terms of demand in the near term. Should Europe’s economy start to underperform due to political and sovereign tensions, the risk for a more sluggish outlook could hurt demand. On the other hand, a pickup in demand is expected should Europe’s economy pick up pace.The pivotal level near $3.07 (the high from March 6, 2023) remains key as prices on Wednesday closed above it by just a few cents. Looking up, the red descending trendline at $3.12 would likely slam down any attempts to jump higher. Further up, the fresh year-to-date high at $3.16 is the level to beat. 

On the downside, the 200-day Simple Moving Average (SMA) acts as the first support near $2.53. Should that support area fail to hold, the next target could be the pivotal level near $2.14, with interim support by the 55-day SMA near $2.34. Further down, the biggest support comes at $2.11 with the 100-day SMA. 

Natural Gas: Daily Chart