Natural Gas not impressed after slowdown in US disinflation with surprise uptick in energy complex

• Natural Gas trades near $2.67, continuing a steep decline from Wednesday.
• Traders see ample amounts of supply, despite frost temperatures in Europe and China. 
• The US Dollar rallies as US CPI proves to point to a slowdown in disinflation 

Natural Gas (XNG/USD) is paring back some earlier gains towards the US opening bell with the recent inflation report pointing to an uptick in energy prices. While Israel is facing tribunal repercussions from a possible genocide accusation out of South Africa, negative temperateres across Europe, China and other parts of the Northern hemisphere are eating into Gas reserves. Supply is flowing, however, and ships are still making ports, despite longer routes to circumvent the Red Sea passage. 

The US Dollar (USD) is jumping higher on the back of the US Consumer Price Index (CPI) release. Headline inflation is seeing a halt in disinflation with biggest takeaway a jump in energy prices in the inflation basket. This comes as a surprise with the market being wrong footed as bets were placed on a further quick disinflationary path with the US Federal Reserve expected to cut rates already in early 2024, which is now pushed back to later 2024.

Natural Gas is trading at $2.64 per MMBtu at the time of writing.  

Natural Gas Market Movers: US CPI reveals pickup in gas prices

• Around 15:30 GMT, markets will get the weekly US Gas Storage mubers from the Energy Information Administration (EIA). Expectations are for a substantial decline from a drawdown of 14 billion cubic feet of gas to a drawdown of 119 billion cubic feet. for this week. 
• Iran has seized control of an US tanker in retaliation of an earlier Iranian ship being seized by the US. 
• European Gas prices are sinking with industrial demand not picking up at all and stockpiles still very much equipped to face a longer period of low temperatures on the continent.
• Several Norwegian Oil and Gas companies have launched projects for mining. Expectations are that nearly 40 to 50 wells will come online this year, from the 34 last year. 
• German Gas storages drop to 88% while European Gas storage is still near 82%.
• This Tuesday the first hearings started in the United Nations Tribunal for Genocide against Israel after South Africa launched a formal complait with the tribunal. 

Natural Gas Technical Analysis: Pickup in energy prices means demand

Natural Gas was on a tear earlier this week, nearing $3 finally. The price action plunged back to $2.70, however, after markets saw no supply issues and lacklustre demand from the industry for the commodity. Expect to see still fairly muted reactions to the upside, unless a supply hiccup could emerge at one point out of the Middle East. 

On the upside, Natural Gas is facing all the important Simple Moving Averages (SMA) as resistance levels to the upside. First up, nearby is the 200-day SMA near $2.75. Next up is the 55-day SMA at $2.85. Last but not least is the 100-day SMA at $2.95, near $3.

One big element that is always returning when it comes to Natural Gas, is that there is always an ample amount of supply. Each initial bullish reaction is being backtracked thereafter with the realisation that more supply is present. In that case, expect to see a continuing drop lower to $2.60 with a test at the low of December near $2.20 as not unthinkable. 

XNG/USD (Daily Chart)