NATURAL GAS SHY FROM $2.70 DESPITE USD INDEX ATTEMPTS RECOVERY, DEMAND WORRIES DEEPEN

Natural Gas futures have turned sideways after a perpendicular recovery to near $2.70 in the Asian session. The upside bias in natural gas has been propelled by the weak US Dollar Index (DXY) broadly. Natural Gas futures looks shy near 2.70$ as the USD Index has demonstrated a recovery move to near 103.90 as investors are getting anxious ahead of the release of the United States Consumer Price Index (CPI) data.

The demand for natural gas is expected to witness a bumpy road as industrial demand is set to decline due to higher rates from the Federal Reserve (Fed). The street is expecting that planned rate hikes by Fed chair Jerome Powell will push the US economy into a recession ahead.

 Meanwhile, Winter is almost near the end and summer has not arrived yet. Therefore, demand for residential purposes to warm household areas will remain weak. Also, power companies have less dependency on natural gas as households won’t need much electricity to utilize for running air conditioners.

What has infused fresh blood into the Natural Gas prices is the recent sell-off in the USD Index. This week, the major focus for the action in the Natural Gas futures will be on the inventories data reported by US Energy Information Administration (EIA), scheduled every Thursday.

Going forward, investors are keenly awaiting the release of the US inflation data for fresh consensus. As per the projections, the headline CPI could decline to 6.0% from the former release of 6.4%. And, the core inflation that excludes oil and food prices is expected to trim marginally to 5.5% vs. the prior release of 5.6%.