Natural gas goes through eighth day of consecutive losses

Natural gas prices have fallen by 20% since February, with the US Dollar Index consolidating gains on Wednesday.

The commodity’s prices have been negatively impacted by February, with Shell issuing an outlook where Liquefied Natural Gas demand will be substantially decreased by 2040, reflecting global pushes to abandon fossil fuels.

The US Dollar is trying to consolidate its current position after booking substantial gains on the back of a red-hot US inflation report that pointed to sticky price pressures.

Markets had to push back further expectations of an initial rate cut by the US Federal Reserve from June into July, which made equities nosedive. Natural Gas is currently trading at $1.68 per MMBtu.

Shell’s outlook suggests that demand for LNG by 2040 will be lower than first anticipated. European gas prices are tightening, indicating traders are focusing on restocking European gas storage ahead of next winter. Europe will need to look for 5% more LNG supply to reach the same levels of gas storage seen in 2023 ahead of winter.

Current price levels are making gas cheap enough again for power production, but Natural Gas is unable to halt the current downturn.

A quick return to higher levels looks unlikely anytime soon. On the upside, natural gas faces pivotal technical levels to get back to, such as $1.99, $2.13, and $1.80. If US President Biden’s moratorium is lifted, along with additional supply from Canada, $1.64 and $1.53 (low of 2020) are targets to look out for.

Supply and demand dynamics are key factors influencing Natural Gas prices, influenced by global economic growth, industrial activity, population growth, production levels, and inventories. Weather impacts Natural Gas prices, as more Gas is used during cold winters and hot summers for heating and cooling. Competition from other energy sources, geopolitical events, and government policies relating to extraction, transportation, and environmental issues also impact prices.

The main macroeconomic 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. Economic data from large consumers of Natural Gas, including China, Germany, and Japan, can impact supply and demand.

The value of the US Dollar is a factor in the price of Natural Gas, as it is the world’s reserve currency and most commodities are priced and traded on international markets in US Dollars.