Natural Gas Pulls Back After An Unsuccessful Test Of The $10 Level

Key Insights

• Natural gas prices retreated from recent highs as traders took some profits off the table. 
• WTI oil continued to rebound as traders focused on tight supply. 
• Gold and silver moved higher on weaker U.S. dollar. 

Natural Gas Markets Decline As Traders React To The Pullback In Europe

Natural gas failed to settle above the $10 level but faced strong resistance and pulled back towards $9.25. In Europe, natural gas prices have also pulled back from recent highs.

The key question is whether manufacturers can tolerate high natural gas prices. In the U.S., the situation looks normal, although the recent economic reports raised worries about the health of the economy.

In Europe, the answer to this question is “no”. Today, Polish chemicals firm Grupa Azoty halted production of nitrogen fertilizers and certain other products as natural gas prices became too high. Such decisions will lead to lower consumption of natural gas in Europe.

However, European countries will continue to buy natural gas at a robust pace to prepare for the heating season, so it’s too early to talk about a change of the trend.

In the U.S., traders have reacted to various developments in European markets in recent trading sessions. Thus, the pullback in Europe had a negative impact on U.S. natural gas markets.

Natural gas is currently trading near the support level at $9.35. In case natural gas manages to settle below this level, it will move towards the next support at $9.00. A successful test of the support at $9.00 will push natural gas towards the support at the 20 EMA at $8.70.

On the upside, a move above the $9.35 level will open the way to the test of the resistance at $9.70. In case natural gas manages to settle above $9.70, it will get to another test of the key resistance level at $10.

WTI Oil Gained Strong Upside Momentum

WTI oil rallied towards the $94 level as traders focused on transit problems in the Black Sea.

There is no visible progress in the Iran nuclear deal, which is bullish for oil markets.

In addition, it looks that traders believe that OPEC+ will cut production if Iran nuclear deal negotiations are successful.

Gold Moves Higher As Dollar Slides

Gold tested the $1750 level as the U.S. dollar pulled back from highs after the weak Services PMI report. Weaker dollar is bullish for dollar-denominated commodities.

However, gold bulls should note that Treasury yields are not moving lower. The current trend in yields remains bullish, which is bad news for gold bulls. In case Treasury yields continue to move higher ahead of the Jackson Hole Symposium, gold may find itself under pressure.

Meanwhile, silver and platinum also enjoyed a rebound from recent lows. Palladium remained under pressure amid worries about weak demand from the auto industry.

Copper Markets Stay Strong Despite Weak Economic Data

Copper tested the $3.70 level despite weak Services PMI reports from the U.S. and UK. While some traders would argue that weak sentiment in the services sector has no impact on copper markets, I’d say that weak consumer activity indicates that the manufacturing sector will also face problems in the future.

In this light, it is interesting to see that copper markets remain strong despite weak economic data. The current upside trend remains intact, so copper will likely try to gain additional upside momentum in the upcoming trading sessions.

For a look at all of today’s economic events, check out our economic calendar.