NATURAL GAS PRICE PAUSES AFTER 17% SURGE IN PRIOR WEEK

Natural Gas pauses as traders book profits after the recent rally and the US is off on a national holiday.

Concerns linger regarding European supply adequately meeting demand after outages in Norway, the continent’s main Gas producer. 

Despite bullish fundamentals, the longer-term technical trend remains down as long as prices stay below $3.079 MMBtu. 

Natural Gas price trades flat on Monday, taking a breather after the recent strong rally. Overall volume is light as some traders book profits and those in the US stay away from their desks for the Juneteenth national holiday. 

Last week’s surge was one of the biggest of 2023, with Natural gas prices rising over 17%. The main catalyst was supply fears as several European Gas plants suffered longer-than-expected outages, leading to concerns of a repeat of last year’s supply crisis from Russia’s invasion of Ukraine – and unexpectedly hot weather increasing air-conditioning demand. 

XNG/USD is trading a whisker down on the day, exchanging hands at $2.685 MMBtu, at the time of writing.  

Natural Gas news and market movers 

Natural Gas price stabilizes after the recent surge as traders book profits and the US takes the Juneteenth holiday. 

The main catalyst for recent price gains was the news of longer-than-expected outages at Norwegian Gas plants and rumors of an earlier-than-expected closure of the Groningen Gas field in the Netherlands. 

Norwegian supply is now critical to the European continent after it replaced Russia as the main supplier in 2022, when Norwegian Gas accounted for 23% of imports compared to Russia’s 15%, according to a report by CNN. 

The extended shutdown of plants in Norway could shave one billion  cubic meters (bcm) of Gas off supply, and, “It only really takes 5 bcm less… to make the market a lot tighter,” a source told CNN.

“The European gas market — and by extension the global gas market — [is] certainly not out of the woods in terms of adequately matching supply with demand,” Tom Marzec-Manser, head of Gas analytics at ICIS, told CNN.

That said the position is not as precarious as in previous years: European storage facilities are now 73% full — a much higher level than the 56% averaged at the same time of the year over the past five years, according to data from Gas Infrastructure Europe (reported by CNN).

Asian rivalry for Europe’s limited supply is also likely to be less than in previous years, after Japan and South Korea recorded much higher stores and the Chinese economy continues to falter after months of lockdown. 

Demand for air conditioning has risen due to hotter-than-expected weather in the Western hemisphere as the summer season begins. 

The ongoing Atlantic hurricane season in the US could further increase demand in the US. 

Supply showed an unexpected fall in last week’s Energy Information Administration (EIA) data, after dropping to 84 billion cubic feet (Bcf) versus the 95 Bcf forecast and the 104 Bcf of the prior period, further exacerbating supply-demand imbalances.   

The US Dollar could be a factor for XNG/USD, as market expectations of the trajectory of future interest rate changes in the US clash with comments from US Federal Reserve (Fed) officials. 

Fed speakers, Jerome Powell included, are taking a more hawkish line than market-based gauges suggest, with Powell recently mentioning the chance of two more hikes in 2023 when the market only expects one. 

Interest rate hikes are bullish for the US Dollar (bearish for XNG/USD) as higher interest rates attract more inflows from global investors seeking to park their money in the US for maximum return.