Natural gas exits with traders worried about Europe’s ability to weather the winter

• Natural gas is already trading at high levels after constant attacks on Lebanon by Israel.
• European gas reserves are 94% full, although declines are already being reported in Germany.
• The US dollar index is under pressure as China’s stimulus plan leads to the relocation of some of their investments.

Natural gas futures rose on Wednesday after a brief lull in the previous day’s rally. Heightened geopolitical tensions between Israel and Lebanon are still present, with supply concerns for Europe also coming to the fore. Underground reserves of gas stocks in Europe are almost 94% full, which is an excellent level, although more worryingly, stocks are not rising and are even seeing some declines locally, triggering concerns for reserves during the winters.

Meanwhile, the US Dollar Index (DXY), which tracks the greenback against six major currencies, is under selling pressure after the announcement of a massive stimulus plan from China boosted market sentiment. In addition, weak economic data from the United States (US) is also weighing on the greenback. This Wednesday will be a very quiet day in terms of macroeconomic releases, with some minor housing data standing out. Furthermore, the main events this week will be the US Q2 Gross Domestic Product (GDP) on Thursday and the US Personal Consumption Expenditure (PCE) Price Index on Friday.

Natural gas is trading at $2.91 per MMBtu at the time of writing.

Natural gas news and market: Europe sees consumption increase

• European weather is facing a cold front, which is already seeing gas drawn from its reserves in Germany, for example, Bloomberg data shows.
• Tropical Storm Helene is expected to hit the coast of Florida in the US Gulf of Mexico region by Thursday, the National Hurricane Center said.
• Warmer-than-normal weather in Japan has seen expanded consumption of liquefied natural gas (LNG), increasing the need for more fuel ahead of the seasonal demand peak in winter, Reuters reports.
• The LNG tanker Pioneer is traveling through the Suez Canal to the Red Sea, according to ship tracking data from Bloomberg. The vessel was sanctioned by the US last month for being linked to Russia’s alleged shadow LNG fleet.

Natural Gas Technical Analysis: Surge for More Advantage

Natural gas prices are on their way to another step higher. This time, the demand side comes into play. With European storage figures reporting that withdrawals are higher than deliveries, there could be concerns that tactical stocks will be too low to see through the winter season.

On the other hand, $3.08 is the first pivot level to watch. To note, once above $3.20, a new high will be made for 2024. Finally, $3.50 would be the next major resistance.

On the downside, three clear levels can be identified as support. The first is a bounce off the red downtrend line near $2.80. Below, the green uptrend line near $2.70 and the 100-day Simple Moving Average (SMA) at $2.50 should be able to avoid further decline.

Natural gas: daily chart