Natural Gas News: Market Slides as Hormuz Reopening Hits LNG Demand

Natural Gas Drops Hard as Ceasefire Removes LNG Export Premium

U.S. natural gas futures are sharply lower early Wednesday after the U.S. and Iran agreed to a two-week ceasefire and Iran agreed to reopen the Strait of Hormuz.

At 08:53 GMT, May Natural Gas futures are trading $2.720, down $0.150 or -5.23%.

Natural gas had its own war story. Prices spiked when the conflict started on February 27 but quietly sold off over the following weeks, eventually erasing every gain from that day. What kept a bid under the market wasn’t a risk premium. It was LNG export demand. U.S. plants were running around the clock shipping liquefied natural gas to Europe and that steady demand flow kept prices from collapsing completely.

Technical Outlook

Technically, the May Natural Gas futures contract is in a downtrend according to three different metrics, a trend line, the swing chart and the 50-day moving average.

The trend line has been providing guidance and resistance since formed at $4.075 on January 30. Today, it comes in at $2.993.

The nearest main swing top is $3.060. A trade through this price will change the trend to up. The nearest minor trend top is $2.888. A trade through this level will shift momentum to the upside.

The market is also trading below the 50-day moving average at $3.074. This is also resistance and a potential trigger point for an acceleration to the upside.

On the downside, a trade through the main bottom at $2.689 will reaffirm the downtrend, which would open the door for a further break into main bottoms at $2.622 and $2.514.

Ceasefire Eases Urgency for U.S. LNG

The ceasefire changes the calculation. With the Strait reopening, European and Asian buyers have options again. Both regions had been competing aggressively for supply and that competition was supporting U.S. LNG exports. If Middle East volumes start flowing again, that demand pressure eases and the urgency around U.S. cargoes drops with it.

The sharp sell-off in crude is pulling sentiment across the entire energy complex too, stripping out risk premium that had been built into gas prices alongside oil.

The two-week window is the caveat. If no permanent deal is reached and the Strait closes again, that export demand comes right back. Bottom line: this is a shift in global demand expectations and traders aren’t waiting around to find out if it sticks.

More Information in our Economic Calendar.