Natural Gas May See Volatile Trading as Nord Stream 2 Tensions Escalate

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Natural Gas, Weather, EIA, Nord Stream 2, Europe – Talking Points

  • Arctic-like temperatures throughout US Northern Plains and Midwest bolstering costs
  • Nord stream 2 pipeline political implications afoot as US and Russia set to spare
  • Prices put in sturdy begin to January, however outlook unsure beneath 200-day SMA

Natural gasoline costs are on the rise as soon as once more amid risky climate and an ongoing vitality crunch in Europe. A blast of frigid air has blanketed the Northern Plains within the United States, with mercury readings properly beneath zero. Meanwhile, winter storm warnings are in impact throughout a number of states. These elements are more likely to improve demand for the commodity.

However, hotter temperatures are forecasted over the subsequent a number of weeks throughout a lot of the US. If temperatures do rise, we may even see costs trim positive factors made this week. Despite US benchmark Henry Hub costs being up over 3% on the month, the heating gasoline is coming off three consecutive month-to-month losses. Prices must rise greater than 50% to problem the 2021 excessive seen final October.

The Energy Information Administration (EIA) will report stockpiles for the week ending December 31 tonight, with analysts anticipating a discount of 54 billion cubic toes (bcf). An outsize draw may even see a short-term bounce in costs. However, US costs have change into extra insulated from supply-side shocks, with storage ranges just lately rising above the 5-year common, in accordance with EIA information (see chart beneath).

Source: ir.eia.gov

Elsewhere, European costs are much more risky because the vitality crunch throughout the continent continues to face low stock ranges and political implications from the Russian Nord Stream 2 pipeline. That pipeline – slated to enter operation within the second half of this yr – is now getting used as doable leverage over Russia.

US Secretary of State Anthony Blinken acknowledged earlier this week that it will be arduous to see gasoline flowing by way of the pipeline if Russia continues its aggression towards Ukraine. Russia at the moment has practically 100,000 troops massed on the Ukrainian border, with many fearing a doable invasion. The United States and Germany have an settlement in place that measures could be taken towards Russia had been they to weaponize the pipeline.

Germany sees the pipeline as a solution to diversify its vitality sources, however the US has at all times opposed it. The Biden administration has a number of diplomatic conferences scheduled within the coming weeks with Russia to aim to ease tensions on the Ukrainian border. However, the US Senate is planning to vote on a measure that might renege a Biden administration waiver over earlier sanctions on Russia that focused the pipeline, complicating issues additional. Republicans, and a few in Biden’s occasion, consider the venture would bolster Russia’s affect over Europe.

Natural Gas Technical Forecast

US pure gasoline has made headway up to now this yr, however costs stay beneath the 200-day Simple transferring Average (SMA), and the 50-day SMA continues to drop after crossing beneath the 100-day SMA final month. The 78.6% Fibonacci retracement offered help round 3.610. A break beneath that stage might open the door for some bearish motion. Alternatively, costs might want to pierce above the 200-day SMA if bulls wish to drive costs greater.

Natural Gas Daily Chart

natgas chart

Chart created with TradingView

— Written by Thomas Westwater, Analyst for DailyFX.com

To contact Thomas, use the feedback part beneath or @FxWestwater on Twitter

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