Natural Gas Dips Over 1% Amidst Bearish Sentiment in Gas Markets

Natural Gas prices struggled to surpass the $1.90 mark this week, facing resistance amid a backdrop of subdued economic outlook signaled by European PMI data. As a result, traders are relinquishing their bullish outlook on the commodity.

In the US, Natural Gas (XNG/USD) trades relatively unchanged on Friday, poised to conclude the week with a modest gain. However, across the Atlantic, the European Gas market is poised to close in the red as ample reserves and tepid economic projections in Germany weigh on demand.

Simultaneously, the DXY US Dollar Index is surging above 104.00, fueled by skepticism surrounding the Federal Reserve’s soft-landing narrative. Market sentiment is skeptical of the projected three Fed rate cuts for 2024, as recent US economic indicators continue to signal robust growth, undermining the rationale for monetary easing.

Currently, Natural Gas is priced at $1.83 per MMBtu.

In other developments, geopolitical tensions are influencing the Natural Gas market dynamics. The UN summit convened on Friday to deliberate a potential ceasefire in Gaza, which could introduce downside risks to Natural Gas prices if realized. Additionally, China and Russia’s opposition to the US proposal at the summit adds to the geopolitical uncertainty. Furthermore, Russian Liquified Petroleum Gas prices are soaring following Ukraine drone strikes on storage facilities, while India’s refusal to accept Russian oil due to US sanctions could extend into Gas deliveries, potentially tightening prices in the region.

Technical Analysis: Natural Gas Consolidation and Outlook

Natural Gas prices are currently consolidating within a pennant formation on the Daily Chart, characterized by lower highs and higher lows since mid-February. This consolidation suggests an impending breakout, with the prevailing sentiment leaning towards a downside movement given lackluster energy demand in Europe and elevated storage levels.

To the upside, a breakthrough above the $2.00 level is crucial, followed by resistance at the historic pivotal point around $2.12, coinciding with the 55-day Simple Moving Average (SMA) at $2.05. Further resistance is anticipated near the red descending trendline at approximately $2.27.

Conversely, downside support levels include multi-year lows near $1.65, followed by this year’s low at $1.60. A breach of these levels could see prices targeting the next support area around $1.53.