Natural Gas rally fades as strike concerns abate and supply rises

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• Natural Gas could fall as demand remains tepid and stockpiles high. 
• The US Dollar is taking a step back with weak US data ahead of the jobs report. 
• Expect a sideways to lower gas price as supply starts to build with less demand.

Natural Gas could be retreating from its peak print in recent days on the back of concerns of a possible shut down from Australia’s LNG export to the rest of the world. As the week progresses, another local exporter was able to broker a deal and avoid any future strike actions. This opens the door for Chevron to strike a deal as well, which would mean that any supply issues are to be limited in the near future. 

Meanwhile, the demand side is staying steady to lower as the European bloc is way ahead of its target for this winter in filling up the strategic gas storages. The European bloc is committed to shun away from fossil fuels by 2027 out of Russia. However, EU countries have bought a record 52% of all cubic metres of LNG that Russia has exported this year. 

At the time of writing, Natural Gas is trading at $2.926 per MMBtu.  

Natural Gas news and market movers

• The Energy Information Administration (EIA) is due to publish the weekly Natural Gas Storage Changes for this week at 14:30 GMT. In line with recent headlines, another build is expected from 18 to 29 billion cubic feet. 
• Oman LNG has signed a new deal with Shell and OQ to deliver LNG.
• Trading profits for PetroChina have surged as the company expanded its role in the global gas market and Chinese firms were aible to enjoy the oil discount price from Russian crude.  
• China’s LNG consumption for July has risen 9.6% year-on-year. 
• The recent batch of weaker data from the US, with a lower than expected US Gross Domestic Product and a substantial decline in US JOLTS job openings, could point to less LNG demand in the coming quarters. 
• European gas storage is at 93% and saw further stockpile growth this week.
• Australian local exporter Woodside Energy Group Limited has reached a breakthrough agreement with unions. This could mean that Chevron might broker a deal as well soon and still alleviate any possible strike actions at the start of September. 
• Tropical storm Idalia is heading over Georgia as it weakens to a Category 1 hurricane.   
• All eyes remain on the market moving US jobs report on Friday. 

Natural Gas Technical Analysis: the rally stalls with $3 in sight

Natural Gas has been on a tear this week and starts to face a few headwinds. With the demand side not picking up any further and the supply side possibly not as tight as first foreseen, a small rebalancing of the gas price could be at hand. Expect to see some profit taking into the rally of this week, which means that the $3 handle looks out of reach. 

On the upside, $3 is still the level to watch once Natural Gas prices can reclaim $2.9. Should prices recover, look for a close above $2.935, the high of August 15, in order to confirm that demand is picking up again. More upside toward $3 and $3.065 (high of August 9) would be targets or levels to watch. 

On the downside, the trend channel has done a massive job underpinning the price action. Aside from one small false break, ample support was provided near $2.60. The 55-day Simple Moving Average (SMA) needs to give that much needed support at $2.69 ahead of the ascending trend channel at $2.61. Any falling knives can still be caught by the 100-day SMA near $2.55.

XNG/USD (Daily Chart)