Natural gas is trading steady as rising tensions in the Middle East meet sluggish demand

• Natural gas is holding its head above $2.30 after last week’s rally.
• Markets see Europe cutting demand as tensions in Gaza rise again.
• The US dollar index is holding steady just below the key level ahead of the ISM Manufacturing numbers.

Natural gas is trading near $2.32 with some bearish and bullish elements in play, keeping natural gas prices fairly steady. The optimistic elements come from tensions in the Middle East, where the Israeli people are beginning to question the approach of Israeli Prime Minister Benjamin Netanyahu and demand a quick ceasefire and peace agreement for the safe return of the hostages. On the other hand, bearish news is coming out of Europe, with gas storages almost full ahead of the next heating season and the German auto industry struggling.

Meanwhile, the US Dollar Index (DXY), which tracks the value of the greenback against six major currencies, is holding on to the recovery seen last week. Markets took a nosedive after US Federal Reserve Chairman Jerome Powell’s Jackson Hole speech, with signs that a rate cut in September could be more than 25 basis points. Recent US data shows that even a 25 basis point rate cut is beginning to be in doubt, with Friday’s nonfarm payrolls report a key data point to confirm how big that rate cut will be in September.

Natural gas is trading at $2.32 per MMBtu at the time of writing.

Natural gas news and market developments: Europe is closed for gas

• Russian LNG supplier Novatek offers LNG to ports in Europe or Asia.
• European gas storage facilities are over 92% full. However, any disruption would still be enough to see gas prices rise, according to Bloomberg.
• Bloomberg Economics further points to risks related to Ukraine’s incursion into Russia as a secondary risk to gas prices, which could rise if Russia retaliates strongly.
• News from Germany that Volkswagen will cut production facilities could mean lower demand from German industry as production in Europe shrinks further, Reuters reports.

Technical Analysis of Natural Gas: Both Ways

Natural gas prices are a bit torn as any upside seems limited for now. Europe is well short of its goal of securing enough gas to see it through the next heating season. Meanwhile, Russia is facing pressure in its financial system, with China withdrawing its liquidity support due to US sanctions and Ukraine’s trip to Russia. Expect any gains in gas prices to remain subdued with no substantial realizations occurring if current events remain as they are.

If more bullish headlines emerge and push gas prices higher, look to the moving averages as resistance to the upside going forward. First, the 100-day simple moving average (SMA) at $2.42 would already be a significant move higher. Above, the green uptrend line at $2.56 could be tested.

On the downside, very close support from the 200-day SMA at $2.29 should prevent gas prices from falling. Should this level break, $2.13 is back in play for a test and possible drop below. While still a ways off, a return to $2.00 or below could mean a test of the August low, with $1.93 on the cards.

Natural gas: daily chart