Natural Gas keeps sinking with Shell downgrading outlook

• Natural Gas enters the eighth day of consecutive losses. 
• Traders are sending Gas prices already 20% lower since the start of February.
• The US Dollar Index roared on the back of red-hot inflation, consolidating gains this Wednesday. 

Natural Gas (XNG/USD) is sinking lower in search of rock bottom. The additional move this time comes with Shell issuing an outlook where Liquefied Natural Gas (LNG) demand will be substantially decreased by 2040, seeing the current pushes worldwide to abandon fossil fuels. The outlook supports the overall trend seen in both Oil and Gas with several administrations worldwide taking measures to further limit and phase out usage on all fronts. 

The US Dollar (USD) is trying to consolidate its current position after it booked some substantial gains on the back of a red-hot US inflation report that pointed to sticky price pressures being present. Markets had to push back further their expectations of an initial rate cut by the US Federal Reserve (Fed) from June into July. This made equities nosedive, though those are recovering at the moment ahead of the US opening bell. 

Natural Gas is trading at $1.71 per MMBtu at the time of writing.  

Natural Gas market movers: Questions about the future

• Shell said in its outlook that demand for LNG by 2040 will be lower than first anticipated. 
• Some tightening in European gas prices is showing that traders are focussing on the restocking of European gas storage ahead of next winter.
• Europe will need to look for 5% more LNG supply in order to reach the same levels of gas storage seen in 2023 ahead of winter.
• The warm front is closing in as expected and would see temperatures rise to unseasonable levels with London projected to reach 13 degrees Celsius. 

Natural Gas Technical Analysis: More in the tank to drop

Natural Gas is unable to halt the current downturn which has been going on for eight straight days already. More downturn looks to be at hand with supply still very much flowing and demand remaining rather tepid. Add several more calls for the longer term outlook where LNG and other fossil fuels are being phased out, and a quick return to higher levels looks not to be in the cards anytime soon. 

On the upside, Natural Gas is facing some pivotal technical levels to get back to. First, $1.99, which saw an accelerated decline. Next is the blue line at $2.13 with the triple bottoms from 2023. In case Natural Gas sees sudden demand pick up, possibly $2.40 could come into play. 

Keep an eye on $1.80, which was a pivotal level back in July 2020 and should act as a cap now. Should US President Biden’s moratorium be lifted, together with the additional supply from Canada – which is exporting more to fill the gap from the US – $1.64 and $1.53 (low of 2020) are targets to look out for. 

XNG/USD (Daily Chart)