Natural Gas at One-month High: Energy ‘Chaos’? Where Will the Price Move Next?


There has been a deluge of reports over the past day that have indicated toward a notion that the energy markets – mostly the raw materials that provide the basis for producing energy products such as natural gas and crude oil – are somehow in ‘turmoil’.

These sentiments have been on the minds of both news reporters and financial analysts alike, with some even laying the blame for European market price moves at the door of professional traders who do not usually trade energy related commodities, whilst others look toward the dramatized reports in Western media which emerged late last week speculating on the geopolitics within Russia, a major energy producing nation.

The reality is, however, that the market for natural gas has been growing and during the course of the last 30 days, prices have been steadily increasing with no sign at all of turmoil.

At the beginning of the trading day in European markets today, natural gas began at a 1-month high.

Natural gas has been holding a very strong position against the US dollar (XNGUSD pair) for over a month, with a low point of 2.263 to a high of 2.895 on Monday, with a measurement of 1 MMBTU of natural gas measured in US dollars.

Indicative pricing only

As the week has progressed, the price of natural gas as a spot transaction against the US dollar has held its position, decreasing very slightly during yesterday evening’s trading session to 2.837.

This was a very minor decrease in value, however. Looking at the charts shows a very high position forming during the past three days compared to any period during the past thirty days.

Such a strong price rise for natural gas demonstrates that these concerns held by commentators that the prices would decrease did not come to pass.

The price rise is actually a genuine price rise for natural gas rather than volatility in the US dollar. This can be checked by viewing the prices of Henry Hub Natural Gas on the NYMEX commodity exchange which shows a similar pattern as the spot-traded natural gas against US dollar.

There is perhaps one interesting and possibly tangible reason why there may be price moves in the natural gas market, this being the closure of the Groningen natural gas field in Norway, which could be a legitimate cause of a lower supply to European customers, therefore causing a price increase.

There has been a high degree of volatility within the natural gas market over recent times, notably a price jump on June 15 by an astonishing 30%.

This upward direction has been sustained since, and despite the reports that geopolitical aspects such as ongoing sanctions by western nations on a major gas producing country, an influx of traders who would ordinarily trade other asset classes hitting the natural gas markets and a host of speculation regarding the ongoing conflict, much of which is hard to substantiate, the volatility has been in an upward direction.

Add to the mix that since the Nordstream gas pipeline was disrupted, European consumers have rushed to buy liquified gas on the spot market, and a recipe for high prices is clear.

Where will it go next? With such high current demand, the correlation between prices and customer requirements is clear – but with such a necessary consumable commodity for commerce and everyday life, moves to make it more affordable may come into effect. Stay tuned!

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This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.

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