Natural Gas Drops On Recession Risks

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Natural Gas Drops On Recession Risks

Natural Gas Drops To $3.39 On Recession Risks

As we approach the end of the 2nd trading day of the week, the natural gas is en route to close in the red once again. Elsewhere, the EU gas futures are also down by almost 3%, which signals a more widespread decline in prices.

In addition, the US major banks such as Bank of America & Goldman Sachs also released their earnings, which were higher than the estimates. However, the results have also shown that the overall financial health of US consumers is on a decline.

US Dollar On The Backfoot

Another factor that is going well for the Natural Gas is the retreat of the US Dollar. Looking back at the bank earnings report, it shows that the ratio of default loans is on the rise, along with the delinquencies of credit cards as well. So, when we combine all of these factors, it suggests that the USA is heading into a recession.

For now, Natural Gas is trading near $3.39 / MMBtu with more downside risk ahead. The reason is that European gas prices are already way lower than the US natural gas. So, if we take the EU prices as guidance, it suggests a similar face is awaiting the US gas prices as well.

Looking ahead, the temperatures will stay mild in the winter season, which means the gas storage of the USA and the EU will be enough to sustain the cold. So that's another factor that is natural gas bearish & the upcoming winter season will lend little support to it.

On the upside, the most significant resistance zone for natural gas is located near the $3.65 and then the $4.3080 level. On the other hand, the nearest support is located at $3.30, followed by $3.07 and then $3.00. If the sellers pierce all of these levels, the next stop will be the $2.85 and then the $2.50 for the natural gas.

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