Natural Gas Price Forecast: Sub-$2 Levels Amid Lower European Demand & Weaker Dollar

Natural gas price has recently experienced a series of consecutive losses, trading below $2.00 on Wednesday. However, this decline can be attributed to several factors, including lower gas demand in Europe, as industrial production contracted more than expected in January.

This decline in demand has contributed to the downward pressure on natural gas prices. Furthermore, the US Dollar Index (DXY) trading below 103.00 has also impacted natural gas prices, as a weaker dollar tends to make commodities priced in dollars more expensive for holders of other currencies.

Impact of Gas Demand in Europe on Natural Gas

It is worth noting that the decrease in gas demand in Europe due to a contraction in industrial production in January has had a significant impact on natural gas prices. With European industrial production falling more than expected, the outlook for gas demand in the region has weakened.

This, coupled with the fading gas consumption from households as spring and summer approach, has increased the selling pressure on natural gas. The decline in demand from Europe has added to the bearish sentiment surrounding natural gas prices.

US Dollar Index and its Impact on Natural Gas (XNG/USD)

On the US front, the broad-based US dollar has played a major role in influencing natural gas prices. Despite the US Consumer Price Index (CPI) indicating persistent inflation, the US dollar failed to break higher on Wednesday, trading below 103.00.

Hence, the weaker dollar typically makes commodities priced in dollars more attractive to holders of other currencies, leading to higher prices. However, the inability of the US dollar to break higher has prevented a significant increase in natural gas prices.

Looking ahead, several factors will continue to impact natural gas prices. The seasonality of natural gas markets, with summer contracts trading at a discount compared to winter contracts, suggests less price pressure for European households as they restock ahead of the next heating season.

Moreover, geopolitical factors, such as the ongoing ceasefire talks between Gaza and Israel, could also influence natural gas prices.

Natural Gas Price Forecast: Technical Outlook

Natural gas (NG) experienced a decrease, down 1.35% to $1.749 on March 13. The pivot point for NG is at $1.78, indicating the current market sentiment leans towards bearishness below this level.

Resistance levels are noted at $1.85, $1.90, and $1.95, which NG would need to surpass to indicate a shift towards a bullish trend. Conversely, support levels are positioned at $1.73, $1.66, and $1.61, providing potential areas where the price might stabilize or rebound.

The Relative Strength Index (RSI) stands at 30, suggesting NG is currently oversold and might see a reversal or pause in the selling trend. The 50-day Exponential Moving Average (EMA) at $1.85 aligns with resistance levels, further signalling a bearish outlook.

However, a technical pattern, such as a double bottom, around $1.7250 could offer support and possibly lead to a reversal if NG can breach above the pivotal $1.78 mark. Investors should watch these key levels closely for potential trend changes.