Natural Gas falls 2% on Wednesday, extending Tuesday’s sell-off
- Natural Gas price trades 2% lower on Wednesday, continuing Tuesday’s sell-off.
- Volatility from positoning ahead of front-month Options and Futures contract expiration may be driving prices lower.
- The heatwave in North America and Europe continues to drive demand to power air conditioning, but temperatures are set to ease in the US.
- Price has climbed towards a significant level around $3.000 MMBtu where the longer-term downtrend could be at risk of reversing.
Natural Gas price trades 2% lower during the US Session on Wednesday, extending the heavy sell-off in the markets on Tuesday. Easing Russia turmoil after Wagner’s failed coup has taken the bullish tendancy out of markets and some volatility appears to be creeping in as traders adjust positions ahead of the end of the month. The heatwave that has ravaged much of the US is expanding into the South but forecasters say temperatures will ease next week, reducing demand for air conditioning, and also weighing on price.
XNG/USD is trading in the $2.700s MMBtu on Wednesday, during the US session.
Natural Gas news and market movers
- Natural Gas weakens after the Wagner mutiny suddenly grinds to a halt, easing concerns Russian supply might suffer in the event of civil war, according to CNN.
- Volatility from traders shuffling positions ahead of the expiration date for front-month Futures and Options contracts might be impacting prices as June ends, according to Natural Gas Intelligence (NGI).
- Demand for Natural Gas in the US to power air conditioning may be about to moderate after reports temperatures in the US are set to return to average ranges for this time of year next week.
- The fall in open interest and average volume, however, reveals a lack of particiaption accompanying the drop in price on Tuesday which might be a positive sign for Natural Gas price, according to FXStreet Senior Analyst and Editor Pablo Piovano, in a report analyzing CME data on Tuesday.
- “The downtick (in price) was accompanied by a sharp drop in open interest, which seems to pave the way for further gains in the very near term.” Said Piovano.
- Norwegian supply concerns, after outages at the Hammerfest LNG export terminal and the processing plants at Nyhamna and Kollsnes, continue to underpin prices. Norway has taken over from Russia as Europe’s main source of Natural Gas.
Natural Gas Technical Analysis: Recovery stalls nears significant trend-determination level
Natural Gas price is trading just below a key trend-determination level on longer-term charts. Although the commodity remains in a long-term downtrend since turning lower at the August 2022 peak, bearish momentum has tapered off considerably.
The Relative Strength Index (RSI) momentum indicator is converging bullishly with price on the weekly chart, something that occurs when price makes new lows but RSI does not.
A break above the last lower high of the long-term downtrend at $3.079 MMBtu would indicate a reversal in the broader downtrend.
Given this level has not been breached yet, however, the downtrend remains intact and a break below the $2.110 year-to-date lows would provide a confirmation of a continuation down to a target at $1.546. This target is the 61.8% Fibonacci extension of the height of the roughly sideways consolidation range that has been unfolding during 2023 (marked 161.8% on charts).
On the daily chart, price has been climbing within a roughly sideways market, although it has broken above both the 50 and not the 100-day Simple Moving Averages (SMA).
Nevertheless, a break above the last lower high of the long-term downtrend at $3.079 MMBtu would be required to indicate a reversal in the broader trend.
Such a move might then see prices rally higher to the next key resistance level at the 200-week SMA, situated at $3.813.
Until that happens however, price will probably continue to consolidate within its range or even go lower.