The natural gas market experienced a downturn following a six-day rally triggered by escalating tensions in the Middle East and the anticipation of extended sanctions on Iran’s oil sector by the US. Despite initial intentions by the Biden administration to avoid disrupting oil exports, the decision to impose sanctions on Iran has reignited concerns over potential supply disruptions, leading to a resurgence in energy prices.
The US Dollar Index (DXY) witnessed a sharp decline due to disappointing preliminary US Purchasing Managers Index (PMI) data for April, signaling a contraction in the manufacturing sector. Although the dollar is rebounding as traders evaluate expectations regarding the timing of the Federal Reserve’s interest rate cuts, uncertainties persist in the market.
Natural Gas Prices Retreat Following Six-Day Rally Amid Geopolitical Tensions and Supply Disruptions (Credits: Reuters)
Natural gas is currently trading at $2.06 per MMBtu, facing supply challenges in Europe with the shutdown of the Hammerfest Liquefied Natural Gas (LNG) plant in Norway due to a leak. This closure, coupled with ongoing issues in the UK’s Elgin Franklin field, contributes to volatility in the gas market, exacerbated by sentiment-driven trading amid a lack of structural changes in Europe’s gas supply landscape.
Natural Gas Prices Retreat Following Six-Day Rally Amid Geopolitical Tensions and Supply Disruptions (Credits: FX Street)
China’s first-quarter LNG imports surged by 21% compared to the previous year, adding further complexity to the global natural gas dynamics. Additionally, technical analysis indicates a significant breakout in natural gas prices, surpassing key resistance levels and reaching a fresh two-month high, driven by heightened geopolitical tensions and the potential impact of US sanctions on Iran.
Despite the recent rally, traders anticipate a possible retracement and profit-taking, with support levels identified at the broken resistance levels around $2.11. However, should prices fall below this level, a movement towards $1.92 is conceivable, testing a bounce off the red descending trend line. The evolving geopolitical landscape and supply dynamics continue to shape the trajectory of natural gas prices, prompting traders to closely monitor market developments for potential trading opportunities.
