- Natural Gas sinks on reports that the Biden administration is set to prolong the LNG export moratorium by 9 to 12 months.
- Traders are looking at the Capitol Hill hearing later this Wednesday for possible oppositions or workarounds.
- The US Dollar Index flirts with a break below 104 as the Greenback fails to find nearby support.
Natural Gas (XNG/USD) falls lower and snaps back below $2 just minutes after research firm Capstone LLC reports that the Liquified Natural Gas (LNG) export moratorium from the Biden administration is due to stick in place for at least 9 to 12 months. That means the LNG ban stays in place even until after the elections. The report comes just hours before a special subcommittee is to take place on the matter at Capitol Hill.
The US Dollar (USD) is feeling this deescalation in geopolitical tensions with some safe haven outflows. This makes the Greenback, which is negatively correlated to Natural Gas, retreat from Monday’s highs and search for support. The 104 marker does not look that solid and could give way, seeing the US Dollar devalue just a little bit more before finding some solid support in the form of the 200-day SMA near 103.59. As for market-moving events, no less than three US Federal Reserve members are due to speak this Wednesday.
Natural Gas is trading at $1.98 per MMBtu at the time of writing.
- Tensions are high at Capitol Hill across political sides with US President Joe Biden’s gas export ban, with a House Energy and Commerce subcommittee hearing taking place this Wednesday.
- Qatar agreed to lower its Liquified Natural Gas (LNG) prices in a longer term agreement with India. Petronet concluded the contract with the Emirate for 7.5 million tons of LNG per year for 20 years.
- The UK has concluded a deal to sell 1 million tons of LNG with Repsol, between 2025 and 2027.
- Norway’s biggest Oil and Gas company Equinor ASA, saw its profits fall in the fourth quarter due to substantially lower Gas prices on global markets.
Natural Gas is trading in very difficult circumstances to stage a rally in any form or way. Beside the sluggish demand in Europe, markets are starting to consider that even the fact that ceasefire talks are ongoing in the Middle East is a good thing. Where questions on a possible deal were considered a risk and pushed gas prices up, this week signs of talks are considered a good thing with all parties still talking and trying to work out an agreement, which is negative for gas prices for now.
On the upside, Natural Gas is facing some pivotal technical levels to get back to. First, the low of January at $2.10 needs to be reclaimed again. Next is the intermediary level near $2.48. Once that area gets hit, expect to see a test near $2.57 at the purple line.
Once the current low at $2.04 gets tested, or broken again, expect the $2.00 big figure to crack under pressure as well. The first level to look for on the downside is near $1.95 (orange level) which goes back to August 2020. Next is the red line near $1.51, the low of June 2021.
XNG/USD (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.
