- Natural gas prices recovered after U.S. inflation data, which fell short of expectations, weighed on the dollar.
- Natural gas traded flat to lower ahead of Friday’s data on – European inventories that beat expectations.
Fed The preferred measure of inflation, the core PCE price index rose 0.3% mom in May, missing expectations and not the expected 0.4%. Year-over-year growth was 4.6%, compared with expectations for a 4.7% increase, according to the Bureau of Economic Analysis. The outcome reduces the chances that the Federal Reserve will raise interest rates at its next meeting in July. This weakens the dollar because higher interest rates tend to attract more foreign capital inflows. A weaker dollar led to higher natural gas prices in dollar terms. Europe is building up much higher levels of natural gas storage in preparation for winter than usual, alleviating supply concerns and keeping prices in check.
- According to the latest data from S&P Global, gas storage capacity in Europe has reached 77%, compared to 58% in 2022 and 48% in 2021.
S&P Global article suggests that demand may still rise in Q3 (2023) due to low prices. Q3 infographic (see below) forecasts a 2.4% rise in gas demand to 680 million cubic meters of gas per day (mcm/d) in the quarter. S&P Global said rising natural gas inventories and a solar boom would “relieve supply pressure”. Oilprice.com reporter Irina Slav said that the current relatively low gas prices are themselves a result of the overall low level of demand so far in 2023. Slav said reduced consumption has become the norm in Europe after soaring energy bills in 2022, with pressure from some governments to reduce consumption conspiring to force consumers to be more cautious.
- Winter 2022-2023 for the US and Europe is also relatively mild, reducing natural gas demand and leading to higher inventories than last year. That means less money will be needed to top up in 2023, Slav wrote.
“As expected, lower prices are due to lower demand. Europe is indeed buying LNG. But it is buying a lot less than last year: because its storage caverns are not infinite , and there is still quite a lot of gas left over from last year in it,” Slav reported on Friday. Natural gas prices also fell after the restoration of geopolitical stability in Russia, which remains a major producer. When the Wagner mutiny began, prices rose amid fears that supplies would be disrupted by civil war. However, now that the mutiny is over, they have retreated. Norwegian supply concerns continued to underpin prices after power outages at the Hammerfest LNG export terminal and at the Nyhamna and Korsnes processing plants. However, high storage levels in Europe mean that blackouts in Norway are now less of a concern. Volatility as traders adjust positions ahead of the expiry dates of front-month futures and options contracts could affect prices as June draws to a close, according to Natural Gas Intelligence (NGI). Turning to the U.S., natural gas prices gapped higher on Thursday after EIA data showed a smaller-than-expected change in U.S. storage data for the week ended June 23. nearly 10% off the June high after a sudden recovery. Demand for natural gas to power air conditioners may be about to slow on reports that U.S. temperatures will return to average levels for this time of year next week.
Natural Gas: S&P Global Infographic -638237258617255695.png)
Natural Gas Technical Analysis: Recovery stalls around important trend-determining levels
Natural gas prices trade slightly below key trends on long-term charts Determine the level. Although the commodity is still in a long-term downtrend from the lower August 2022 high, the bearish momentum has weakened significantly. Relative Strength Index (RSI) momentum indicator and price bullish convergence on weekly chart, when price makes new low But that’s what happens when the RSI doesn’t make new lows. A break above the last lower high of the long-term downtrend at 3.079 MMBtu would indicate a reversal in the broader downtrend.
Natural Gas: Weekly Chart
However, given that this level has yet to be breached, the downtrend remains intact and a break below the year-to-date low of $2.110 would confirm a continuation target towards $1.546. The target is the 61.8% Fibonacci extension of the height of the roughly sideways range that unfolds in 2023 (marked 161.8% on the chart). On the daily chart, price has been climbing in a roughly sideways market, although it has broken out 50 and 100-day simple moving average (SMA).
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Natural Gas: Daily Chart
Nonetheless, a break above the last lower high of the long-term downtrend at 3.079 MMBtu would be needed to signal a broader trend reversal. Such a move could see prices rise to the next key resistance at the 200-week moving average, which is $3.813. However, until then, the price may continue to consolidate within its range.
Supply and demand dynamics are a key factor affecting natural gas prices, which are themselves influenced by global economic growth, industrial activity, population growth, production levels and inventories. Weather affects natural gas prices because more natural gas is used for heating and cooling in colder winters and hotter summers. Competition from other energy sources can affect prices as consumers may switch to cheaper energy sources. Geopolitical events are factors exemplified by the war in Ukraine. Government policies related to extraction, transportation and environmental issues also affect prices. affects gas The main economic data piece for prices is the weekly inventory bulletin from the Energy Information Administration (EIA), the U.S. government agency responsible for providing data on the U.S. natural gas market. The EIA Natural Gas Bulletin is usually released on Thursday at 14:30 GMT, the day after the EIA’s weekly Petroleum Bulletin. Supply and demand can be affected by economic data from large consumers of natural gas, the biggest consumers of which include China, Germany and Japan. Natural gas is primarily priced and traded in U.S. dollars, so economic releases affecting the U.S. dollar are also a factor.
US dollars are the world’s reserve Currencies Most commodities, including natural gas, are priced and traded in U.S. dollars on international markets. Therefore, the value of the dollar is a factor in the price of gas, because if the dollar strengthens, it means fewer dollars are needed to buy the same amount of gas (falling prices), and vice versa if the dollar strengthens.
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