Natural Gas slips lower as US bank earnings issue warnings on possible US recession

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• Natural Gas prices are in the red and dipping lower. 
• The US Dollar trades weaker with US bank earnings coming out ahead of the US opening bell. 
• US Natural Gas prices are dropping with lower demand risk. 

Natural Gas prices are taking a turn to the downside ahead of the US opening bell. Already ahead of the current downturn in US futures, European Gas futures were already down over 3%. Meanwhile US banks Goldman Sachs and Bank of America came out with earnings: beats on estimates, though warnings are issued by both banks on a the healthiness of the US consumer. 

Meanwhile, the US Dollar (USD) is retreating a touch as well. Reason as well the US bank earnings with the addtional warning that was issued on the US consumer. The number of defaulting loans and credit card delinquencies is rising, which could be the first signs of the US heading or being in a recession. 

Natural Gas is trading at $3.39 per MMBtu at the time of writing.  

Natural Gas news and market movers

• European gas prices are dropping lower with traders on the lookout for Joe Biden’s visit to Israel on Wednesday in an effort to contain any further escalation in the region. The total price decline since last week for European Gas prices amounts to  40%. 
• The surge in American gas prices could spur a switch to fuel oil instead. 
• European Gas demand remains muted, with gas inventories filled up to 98%.
• Data from Norwegian Gas company Gassco showed gas flow towards Northern Europe and the UK are at their normal average. 
• The Suez Canal will raise transit fees by 5% to 15% for LNG and LPG carriers in the strait. 

Natural Gas Technical Analysis: Taking a turn

Natural Gas tries to pare losses from Monday, though if the European Gas prices are any guidance, more pain is to come into the American Gas prices. Some upticks might be still granted due to the fragile equilibrium in the Middle East, though a firm uptrend does not seem to be at hand. With the expected mild temperatures ahead and European and American gas storages well-equipped to face the winter, rather look for the lower levels to come into play.

With the firm peak and breakthrough out of the trend channel, it will be crucial that the upper band of that same trend channel acts as support. There aren’t any significant resistance levels except for $3.65, the peak of January 17. From there, the high of 2023 near $4.3080 comes into play.

On the downside, the trend channel needs to act as support near $3.30. In case this level breaks down again, Natural Gas prices could sink to $.3.07, with that orange line identified from the double top around mid-August. Should the drop become a broader sell-off, prices could sink below $3 toward $2.85, near the 55-day Simple Moving Average.

XNG/USD (Daily Chart)