Price-action moves by natural gas since Feb. 24 look indicate increasing deviation of the demand-supply equation for defining the natural gas prices from a long time. Russia’s invasion of Ukraine on Feb. 24 has changed this conventional price decisive equation a lot since then.
The imposition of sanctions on Russia by the United States and some western countries have resulted in the counter move by Mr. Putin, the Russian President, with an announcement on Wednesday for payment of Russian gas in Russian rubles by the countries who intend to buy Russian gas and oil. No doubt that Russia supplies 40% of the EU's collective gas needs, 27% of its oil imports, and 46% coal imports.
I find that ruble payment would be possible without breaking EU sanctions, which do not directly hit oil and gas supplies but target banks that could be involved in ruble transactions. Secondly, this move by Russia circumvent sanctions imposed for its invasion of Ukraine. No doubt that this move by Russia has supported the weakening ruble since Wednesday but has provided a steep increase to oil and gas prices.
Thursday, natural gas prices showed good strength despite announcing a much lesser weekly withdrawal. The price-action reflected the impact of sanctions-counter by Russia against sanctions imposition by the United States. No doubt that the psychological resistance continues to be an immediate challenge for natural gas bulls, but a breakout above $5.551 will keep the current uptrend intact during the upcoming weeks.
I feel that Russia's launching of the ruble rocket has compelled the European countries to decrease their dependency on Russia to meet their fuel demand. Still, It could lead to a sudden spike in the natural gas, and crude oil prices as this could generate more inflationary pressure globally at the time while the whole world has been coping with the economic slowdown in the post-pandemic era.
I find that the natural gas could test a fresh peak during this year if find a breakout above the immediate resistance at $5.551 and the next at $6.551 during the upcoming week. While on the lower side, immediate support for natural gas is at $4.451, and the next support is $4.376.
I find that the changing sanctions scenario on the Ukraine-Russia front will continue to influence the price-action of natural gas. Still, the price could remain bullish amid growing volatility during the upcoming week. No doubt, the price-action by the natural gas continues to ignore the weather-generated demand-supply equation that defines natural gas price typically.
In a weekly chart, natural gas consistently maintained an uptrend since Feb. 11, 2022, after testing a low at $3.878. Last Friday, the natural gas closed the week at $5.571, confirming the continuation of an uptrend during the upcoming weeks.
The formation of a ‘Bullish Crossover’ in a weekly chart confirms a gap-up opening on the first trading session of the upcoming week. I find if the price finds a break out above $5.611 on the first trading session, that could be a confirmation of the next breakout above the psychological resistance at $6 during the upcoming week.
Disclaimer: The author of this analysis does not have any position in Natural Gas futures. Readers are advised to take any position at their own risk, as Natural Gas is one of the most liquid commodities in the world.