US natural gas futures were on consolidation for the second session in a row on Thursday after recording significant gains on Friday and Monday. At the time of writing, it was trading at $2.86 per MMBtu. In Europe, concerns over supply disruptions, coupled with colder temperatures, are key bullish factors.
US dollar’s selling pressure
Natural gas price is also finding support in the greenback’s selling pressure. While the dollar index recouped most of the previous session’s losses on Wednesday, it has been range-bound for close to two weeks now as it lacks enough momentum to break past the resistance at $100.
Most recently, the CB consumer confidence data further weighed on the greenback; an aspect that boosted natural gas prices. According to the Conference Board, consumer confidence in September dropped to its lowest in over three years. The index dropped from 105.6 in August to 98.7 in September amid pessimism over the US labor market and the business environment.
Investors are now eyeing additional cues from Jerome Powell’s speech later on Thursday. His tone will likely counter investors’ dovish expectations. Besides, Fed’s preferred gauge for inflation, the PCE price index, is set for release on Friday. Powell has insisted that the Fed’s pace of policy easing will largely depend on incoming data. As such, Friday’s figures will influence the US dollar dynamics and natural gas price by extension.
Weather conditions
Weather remains one of the key drivers of natural gas demand and supply dynamics. According to the US National Hurricane Center, Hurricane Helene has been strengthening rapidly in the Caribbean Sea as it moves towards the US across the Gulf of Mexico. In fact, it is expected to be a major Category 4 hurricane. This has prompted experts to declare it an emergency in Florida; forecast to hit the region on Thursday.
These unfavorable conditions will likely impact natural gas production; an aspect that will further boost prices. Granted, the milder weather expected in most parts of the US is set to dampen the short-term demand for cooling. With these dynamics, investors will be keen on whether the production disruptions will offset low demand. This is as the bulls strive to push prices to the psychological zone of $3 and beyond to June’s levels.
At the same time, natural gas prices in Europe are finding support in lower temperatures as well as concerns over supply disruptions. Various parts of the continent are expected to experience temperatures lower than the season’s norms as the week comes to an end. This will in turn increase the use of gas for heating.
Furthermore, geopolitical tensions in the region is another bullish factor for natural gas prices. Amid the conflicts between the Israeli military and Hezbollah group in southern Lebanon, there are growing concerns over supply flows. The gas fields in Israel cater for the domestic needs in addition to supplying neighbouring countries like Jordan and Egypt.
What’s more, there are concerns that Russia may be planning further strikes on Ukraine. This may impact the natural gas dynamics in the region as pipes in Ukraine are used to move Russian gas across Central Europe.
Natural gas price forecast
Natural gas has gone through a rollercoster in the past few years because of the substantial supply from countries like the United States and Qatar. Most of this gas has been shipped to countries in Europe, which have mostly been cut off from Russia. Gas dropped from almost $10 in 2022 to a low of $1.54 earlier this year.
On the weekly chart, it has formed an inverse head and shoulders pattern, which is a popular reversal sign. Therea are signs that it has formed a triple-bottom pattern, a sign of a reversal.
Most notably, it has jumped above the 50-week moving average while oscillators like the Relative Strength Index (RSI) and the MACD have all pointed upwards. Therefore, a contrarian case can be made about natural gas, meaning that its price will continue rising. If this happens, the next point to watch will be at $3.62, its highest point on October 30th. A break above that level will point to more upside,
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