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  • Writer's pictureSieracki Milosz

Natural Gas takes a step back as US markets close due to the Labor Day Holiday


lng natural gas rafinery market charts

In the world of finance, where markets are in a constant state of flux, even a national holiday can have a significant impact. As the United States takes a breather on Labor Day, the natural gas market finds itself navigating through a complex web of factors. This article delves into the current state of natural gas, the stability of the US dollar, and the various dynamics affecting these markets.


The US Dollar's Steady Stance

Before we dive into the world of natural gas, let's take a moment to understand the current position of the US dollar. After a period of strength on Friday, the dollar has now settled into a stable position. However, it's important to note that this stability comes with its own set of challenges.


With the US bond market closed for the Labor Day holiday, one of the key drivers for the greenback is temporarily absent. Additionally, the global economic landscape is undergoing changes, with European and Asian equities displaying a "risk-on" sentiment. As a result, the US Dollar Index (DXY) is trading slightly in the red, hovering around 104.


Natural Gas: A Balancing Act

At the heart of this article is the natural gas market, which is currently experiencing its own set of complexities. Natural gas prices are under scrutiny as they hover around $2.80, and the future direction remains uncertain.


Supply Side Challenges

One major factor contributing to this uncertainty is the supply side of the equation. Recent events in Norway have caused sudden disruptions in gas production due to unforeseen maintenance. This unexpected bottleneck has sent ripples through the natural gas market, leaving traders on edge.


Simultaneously, Europe, one of the largest consumers of natural gas, is showing reduced interest and demand. The strategic gas stockpiles are nearly full as winter approaches, and they are well ahead of target levels.


The Chinese Conundrum

Another factor that merits attention is China's role in the global natural gas market. Questions abound about whether China will ever return to its pre-COVID levels of LNG demand. President Xi Jinping's decision to skip the G20 meeting raises concerns about funding from Chinese banks to Russia, adding an additional layer of complexity.


Strikes and Weather Woes

Meanwhile, on the other side of the world, Australia is grappling with the risk of strikes that could disrupt natural gas supply. Additionally, bad weather has impacted solar power supply in Japan, placing higher pressure on LNG supplies. The regional costs of LNG supply are also soaring, further contributing to the intricacies of the market.


Norwegian Hurdles

Unplanned curbs in Norway are projected due to unforeseen maintenance at several gas fields, including Aasta Hansteen and Dvalin. Moreover, planned works at Oseberg are being extended due to delays. The main Troll gas field in Norway is also reporting delays in restarting production.


Mediation Talks in Australia

Closer to home, Chevron Australia has initiated mediation talks with workers at its major LNG plants, adding another layer of uncertainty to the market.


Technical Analysis: Charting the Course

Now that we've explored the various factors affecting natural gas, let's take a look at the technical side of things.


Upside Potential

Natural Gas experienced a strong upward momentum last week, alongside rising crude oil prices. However, despite Europe's gas stockpiles being over 90% full, it appears that further demand may be on the horizon. Any delays in production from Norway or sudden strikes in Australia could potentially shift the market dynamics.


On the upside, $3 is the key level to watch, especially after the double top formation observed on Friday and Thursday. Just above this level, the 200-day Simple Moving Average (SMA) acts as a cap and hasn't been tested in recent months. Keeping an eye on $3.03 could be crucial before targeting $3.18 and testing the upper boundary of the trend channel.


Natura Gas Usd market charts

Downside Protection

Conversely, the trend channel has consistently provided support for natural gas prices. With the exception of a minor false break, substantial support has been observed near $2.71. The 55-day SMA needs to continue offering support at $2.71, ahead of the ascending trend channel at $2.63. This means that even in a downturn, there's potential support near $2.71, and any sharp declines could still find stability around the 100-day SMA near $2.58.


Endnote


In conclusion, the natural gas market is facing a complex landscape as supply-side challenges, international dynamics, and technical factors all come into play. While the US dollar stabilizes during the Labor Day holiday, natural gas prices remain uncertain. As we move forward, it's essential to monitor the evolving situation, especially with the potential for further disruptions in supply and shifting global demand patterns.


FAQs


1. Why is the US Dollar trading slightly in the red on Labor Day? The US bond market is closed for the holiday, reducing one of the main drivers of the US dollar.


2. What is causing disruptions in natural gas supply from Norway? Unforeseen maintenance at several gas fields in Norway is causing production delays.


3. Why is Europe showing reduced interest in natural gas despite its stockpiles being nearly full? Europe's strategic gas stockpiles are well ahead of target levels, reducing the immediate need for additional supply.


4.What impact could strikes in Australia have on the natural gas market? Strikes in Australia could disrupt natural gas supply, adding to the market's uncertainty.


5.How is bad weather in Japan affecting the natural gas market? Bad weather in Japan is hurting solar power supply, increasing the pressure on LNG supplies and regional costs.


For more insights and updates on the market, stay tuned to our latest articles.


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