Natural gas futures have hit fair value, with Europe securing supply

• Natural gas receives technical rejection on the upside after attempts to break higher.
• European gas reserves are 93% full as Russian transit deal ends.
• The US dollar index eases after the Fed offers a 50 basis point interest rate cut, with more to come.

Natural gas futures are trading on Thursday after the recent rally that brought prices to a fair value point. On the one hand, Europe is preparing for a cold period in which temperatures will drop below average. On the other hand, Israel’s recent bombing of Hamas radios and walkie-talkies is a setback for any peace deal or ceasefire in the region.

Meanwhile, the US Dollar Index (DXY), which tracks the greenback against six major currencies, is on the back foot after the US Federal Reserve (Fed) offered a 50 basis point (bps) interest rate cut ). In its forecast, the central bank predicted a further 50 basis point rate cut by the end of 2024. Stocks are having a field day on this and are rising across the globe, while the greenback is declining against almost all major currencies. .

Natural gas is trading at $2.56 per MMBtu at the time of writing.

Natural gas news and market: Europe prepares for first consumption test

• European weather will come to the fore in the coming weeks and months, with temperatures expected to be well below normal averages, Bloomberg reports.
• Uniper CEO Michael Lewis reported that Europe is well equipped to continue without Russian gas supplies, Bloomberg reports. On December 31, Austria and Slovakia will see the end of the flow of Russian gas through Ukraine, as the transit agreement will not be renewed or extended.
• Meanwhile, the International Energy Agency (IEA) plans to end Russian gas flows through Ukraine after a transit agreement expires at the end of the year, Reuters reports.

Technical analysis of natural gas: steady state for now

Natural gas prices have topped out for now. Optimistic elements that could drive prices higher, such as the end of Russian transit gas supplies, have already been weighed. Europe itself has secured enough gas to get through the next heating season. The only wildcard remains geopolitical tensions, which could drive gas prices anyway.

On the upside, that blue uptrend line on the daily chart below acts as short-term resistance near $2.62. If the price of gas were to reach above it, a long-term upward trend could play out here. Above, $2.80 and $2.83 (red downtrend line) come into play.

On the downside, three clear levels can be identified to provide short-term and long-term support should prices recover. The first is the 100-day simple moving average (SMA) at $2.47. A leg lower, both the 200-day SMA and 55-day SMA are around $2.28, just ahead of $2.13 (a 2023 pivot level).

Natural gas: daily chart