U.S. natural gas prices have gained 15% in the last five days even though weather forecasts have been mixed on both sides of the Atlantic. Warmer weather is expected in the east of the U.S. starting on January 9th (one of the regions that uses natural gas as a heating fuel). But in Europe we are seeing a cold snap which increases demand for natural gas across much of the continent.
As it stands Europe’s reserves are full at 86% with a projection to use up another 35% before the winter season ends, according to the European Council.
Where do you think natural gas prices are headed in January, 2024? Let us know in the comments and if you have any questions about natural gas and want to ask Kyle, you can also write there.
00:00 Intro
00:12 Natural gas news update
04:39 Natural gas price chart analysis
06:03 Recap
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Natural gas prices have bounced to begin the new year after a significant sell off to end 2023 so in this video we’re going to run through the factors driving prices right now and take a look at the technicals of natural Gas before we push ahead though of course remember to like and comment on this video we’ll be sure to get back to you we want to hear your views and what you expect to see from natural gas markets in 2024 natural gas prices to end 2023 largely due to ample Supply across the
Globe as well as some demand side concerns as economic activity slowed but to beginning 2024 we’ve seen a bounce back in natural gas prices in fact this week a 5% surge on Wednesday really as the outlook for European weather starts to shift now last year there was the
Expectation that weather would be fairly moderate in the winter time in Europe however it would appear based on current meteorological forecast that there is a looming cold SL snap coming in Europe which ought to drive demand for natural gas obviously households seek to heat themselves so that’s pushed natural gas off its lows
And is also conspiring with some other supply side risks uh to push prices higher namely that is the tensions that we’re seeing in the Middle East and in particular the Red Sea now of course the tensions in the Middle East tend to impact oil prices a little bit more but
There is a two two fold impact of what we’re seeing at the moment especially in the Red Sea one it’s clearly the spillover effects of what’s happening in oil markets that tends to have a uh put upward pressure I should say on broader Energy prices including natural gas but
There is also the fear around freight lines in particular and the risk that Freight is carrying natural gas could either be diverted or interrupted by what has been uh uy attacks in the Red Sea that have well recently been tried to be deterred by Western Powers especially in the United States now
Around 12% of global Commerce goes through the or global trade goes through the Red Sea and in fact around 4 to 8% of natural gas trade happens through the Red Sea at some point in time so what we’re seeing now at the moment is a lot of freight companies M for example uh
Routing a lot of their container ships away from the Red Sea through longer uh voyages to get to their final destination which is putting upward pressure on costs and again there’s that risk premium being built in on the basis that perhaps greater conflict in the region especially around that Red Sea
Area uh if the houthis continue their attack on freight troops and of course this is in response to the Israel and Hamas conflict that we will see a major disruption to Global Supply uh that that also adds to some of the demand side factors that we’ve been seeing recently
May be signs of resilient growth in the United States as well in the longer run though there is still the downside risk emerging to natural gas prices stripping out some of the supply side concerns from deteriorating economic conditions across the globe and if you do look at things like the Bloomberg commodity
Index we have seen uh things like uh well oil prices as well as other industrial metal Trend lower really as the markets assume a weaker economic outlook for the year ahead the other potential headwind for natural gas prices which could lead to some level of stabilization in the short
Term is still the fact that although we’re expecting to see or meteorologists are expecting to see this coal snap go through Europe storage levels in Europe remain historically high it’s certainly beyond their 5-year averages so uh data cited by Reuters recently suggested that the storage levels in Europe is still around
86% uh that’s above the longer term average of around 74% so storage capacity is still very high and it would seem Europe is still in the position to be able to absorb shocks so a lot of this upward pressure that we’re seeing on natural gas prices appear to be from
A supply shock perspective so something exogenous to the market uh and driven by seasonal factors which well tend to be a little bit more shortterm in their uh impact on prices rather rather than those longer term uh issues around storage Supply and Global demand so let’s run through some of the
Key technical indicators for natural gas and you can see that we’ve got the market bouncing from extremely oversold levels on The Daily charts and breaking through downward sloping trend line resistance uh indicating this is a little bit of a reversion and retracement going on for the market in
Saying that though the uh price pattern uh being carved out for the market is looking a little bit like a continuation pattern an ascending wedge which typically signals that this move is counter Trend in nature and that something of a breakdown of this move is on the card more than likely posing
Further downside risks for natural gas in terms of the major support levels well $220 is the most previous uh lower low for the market uh a really deep level of support is around $2 which has been defended by buyers in the past but on the upside we’ve got the 200 day moving
Average around $280 above that $3 stands is a very key level to watch with the price not spending too much time above that point in the last couple of years so overall the technicals still look a little bearish for the market and this move looks a little bit like a
Retracement and a reversion to the meme but of course any break out through those key resistance levels could negate that view so in the short term the fundamentals are looking constructive for natural gas the technicals are reasonably questionable as we noted and in the long run there still seems to be
Significant headwinds to natural gas prices but nevertheless we’ll see if the market can push things or push the price of natural gas above that $3 Mark again could Fair could be fairly bullish in the longer run though that $2 level seems to be where buyers have been defending in recent history
