Natural Gas flirts with break lower ahead of US CPI release

Natural Gas flirts with break lower ahead of US CPI release

  • Natural Gas dips again on Thursday, testing vital support before a steep decline. 
  • Traders see demand in Europe soar again, while the June US CPI release holds a grip on US Gas prices. 
  • The US Dollar index eases and trades below 105.00 on concerns over President Biden staying in the race. 

Natural Gas price (XNG/USD) ticks down on Thursday for the third day in a row this week, with mounting pressure on critical support that stands before a possible steep decline. The US Consumer Price Index (CPI) release later in the day is keeping a grip on the US Gas prices, where a further disinflationary print could mean a near certainty that a Federal Reserve’s (Fed) interest rate cut in September is coming. Lower interest rates would boost demand, with a positive outlook for the next quarters in terms of demand for Natural Gas. 

Meanwhile, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, edges lower ahead of the US CPI release, while important public figures such as Nancy Pelosi and Georges Clooney are calling for President Joe Biden to make way for a better candidate on the presidential ballot, weighing on the US Dollar. Markets are holding their breath until the CPI data comes out at 12:30 GMT because it is vital. Should the CPI data be a surprise hotter-than-expected inflation, any possibility for a rate cut in September would be whipped out, with markets repricing a push towards either December or even only at the start of 2025 for the Fed to start lowering borrowing costs. 

Natural Gas is trading at $2.31 per MMBtu at the time of writing.  

Natural Gas news and market movers: CPI to move commodities

  • Expect substantial market volatility on Thursday around 12:30 GMT, when the US Consumer Price Index numbers for June will be released, even in Gas prices.
  • The Karsto plant in Norway faces maintenance until July 13 following another extension earlier, according to network operator Gassco AS, Bloomberg reports.
  • Woodside Energy in Australia has signed a deal with Taiwan for LONG deliveries, Reuters reports.
  • The gas premium spread in Europe is widening between the southern peripheral countries and mainland Europe. Elevated temperatures across Spain, Portugal, and Italy are triggering a short-term tightness with elevated demand over steady supply, Bloomberg reports.

Natural Gas Technical Analysis: Risk for another leg lower

Natural Gas price stabilizes near the crucial support area at $2.30 ahead of June’s US CPI release. It becomes clear that commodity traders seek an outside catalyst to move price action in either direction. Should the CPI release be binary, expect to see a substantial move either way in Gas price on the back of the CPI outcome confirming or denying a September rate cut. 

The 200-day SMA is the first force to reckon with on the upside, near $2.51, closely followed by the 55-day SMA at $2.63. Once back above, the pivotal level near $3.08 (March 6, 2023, high) remains key resistance after its false break last week. 

On the downside, the support level, which could mean some buying opportunities, is $2.30, the 100-day SMA that falls in line with the ascending trend line since mid-February. In case that level does not hold as support, look for the pivotal level near $2.13, which has acted as a cap and floor in the past. 

    

Natural Gas: Daily Chart

Natural Gas FAQs

Supply and demand dynamics are a key factor influencing Natural Gas prices, and are themselves influenced by global economic growth, industrial activity, population growth, production levels, and inventories. The weather impacts Natural Gas prices because more Gas is used during cold winters and hot summers for heating and cooling. Competition from other energy sources impacts prices as consumers may switch to cheaper sources. Geopolitical events are factors as exemplified by the war in Ukraine. Government policies relating to extraction, transportation, and environmental issues also impact prices.

The main economic release influencing Natural Gas prices is the weekly inventory bulletin from the Energy Information Administration (EIA), a US government agency that produces US gas market data. The EIA Gas bulletin usually comes out on Thursday at 14:30 GMT, a day after the EIA publishes its weekly Oil bulletin. Economic data from large consumers of Natural Gas can impact supply and demand, the largest of which include China, Germany and Japan. Natural Gas is primarily priced and traded in US Dollars, thus economic releases impacting the US Dollar are also factors.

The US Dollar is the world’s reserve currency and most commodities, including Natural Gas are priced and traded on international markets in US Dollars. As such, the value of the US Dollar is a factor in the price of Natural Gas, because if the Dollar strengthens it means less Dollars are required to buy the same volume of Gas (the price falls), and vice versa if USD strengthens.

 

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