Spot natural gas trading at 7-week high

Natural gas prices are trading up 4% so far today and are at their highest level since early February. Putting that into context, natural gas spot prices are double what they were this time last year.

Supply worries amid the ongoing Russian war are exacerbating an already tight market.

In the latest developments, headlines following today’s NATO meeting revealed that the group had agreed to bolster its forces in Eastern Europe, increase aid to Ukraine and to toughen sanctions against Moscow – measures likely to further strain relations.

Yesterday Putin announced that payment for natural gas would be transferred to Russian rubles, in a bid to boost the national currency. However, he stressed that Russia would continue to provide energy resources.

Europe is 40% dependent on Russian gas and now finds itself in the difficult position of choosing between its own energy security or the backing of the Russian currency.

Gas futures linked to TTF, Europe’s wholesale gas price, closed up 9% yesterday. The evolution of spot natural gas was more modest.

Change is unlikely to be simple. It would seem likely that contracts would have to be renegotiated based on the current payment terms which are in euros. Even so, this has been a key point in the war so far. It shows that Putin is willing to risk ongoing gas contracts as the war deepens and confrontation with the West intensifies.

This is uncharted territory that puts upward pressure on gasoline prices.

What’s next for spot natural gas?

Spot natural gas trading in a triangular pattern and appears to be on the verge of a breakout. The price has steadily risen, supported by the 50 SMA and the multi-week bullish trend line.

Today’s high pop has taken the price to multi-month downtrend line resistance. The RSI is favorable for a continuation of the rise.

A break above the downtrend line could see price break towards the 2022 high of 5.727, before focusing on the October high of 5.991.

Failure to break the uptrend line could see price bounce back towards the uptrend line and the 50 sma at 4.713. A move below would expose the SNA 100 at 4.430; a move below here could see the short-term bias turn lower, putting 3.975 in play.