Natural Gas prices fall slightly after Fed-driven bounce

• Natural Gas  recovered slightly on Wednesday on the back of the Federal Reserve’s interest-rate decision. 
• Still, Natural Gas prices look set to head lower toward $2.10.
• The US Dollar has depreciated substantially and traders brace for three major central bank decisions on Thursday. 

Natural Gas (XNG/USD) is continuing its decline despite its brief bounce on the back of the dovish US Federal Reserve (Fed) rate decision. Markets cheered the Fed’s signal of upcoming rate cuts for 2024, and OPEC also helped lift Gas prices with a report that pointed to possible supply shortages in the first quarters of 2024. With interest-rate cuts coming, consumers will likely start spending more, triggering higher demand for both Natural Gas and Crude and supporting prices.

Meanwhile, the US Dollar (USD) is set for further volatility on this Super Thursday as the European Central Bank (ECB), the Bank of England (BoE) and the Swiss National Bank (SNB) will release their last rate decisions for 2023. If other central banks turn even more dovish than the Fed, this could make the US Dollar recover recent losses.  

Natural Gas is trading at $2.29 per MMBtu at the time of writing.  

Natural Gas Market Movers: Who wants to buy?

• Fuel Cargoes carrying Liquified Natural Gas (LNG) are piling up at sea as demand from Europe stalls.
• Updated weather forecast models show milder conditions coming in for Europe. 
• Commodity company Trafigura is ramping up buying LNG, with recently buying from Shell with delivery in late January in Northeast Asia. 
• Maersk and Mitsubishi Gas Chemicals have agreed to build a supply base for green methanol in Japan. It would be the first supply base built in the country. 
• Natural Gas Storage numbers from the Energy Information Administration due to be released near 15:30 GMT. Previous number was a drawdown of 117 billion cubic metres. For this week a drawdown of 54 billion is expected.

Natural Gas Technical Analysis: Time to loosen the elastic band

Natural Gas still has a few cents to go to hit a bottom near $2.10. With the Relative Strength Index (RSI) deeply in oversold territory, the times look ripe for Natural Gas to turn the tide a bit. With the Fed confirming rate cuts,  a turnaround for Natural Gas could be seen in early 2024.

On the upside, Natural Gas could return to the purple line near $2.60 as the first hurdle. Next, the 200-day Simple Moving Average (SMA) at $2.74 will act as a resistance before allowing Gas prices to soar to $3 with the 100-day SMA nearby. 

Traders are facing further discounts in near-term expirations in Futures contracts, which means more downside to come as buyers will wait for further declines before starting to buy. Small support could be seen near $2.20, with the low of June. Firmer support should come  in near $2.10, April’s low, at the yellow supportive line. 

XNG/USD (Daily Chart)