Natural Gas hits one-month high amid rumors that Ukraine could join NATO

• Natural Gas prices are swinging higher after reports that NATO is floating the idea to add Ukraine.

• Meanwhile PetroChina is set to expand its LNG business. 

• The US Dollar Index orbits around 104.00 ahead of US CPI numbers and FOMC Minutes.

Natural Gas (XNG/USD) price rallies for a fourth consecutive day, posting a nearly 6.5% gain this week. Gas prices got another boost overnight after a Bloomberg Intelligence article reported that in diplomatic circles there is talk around the idea of incorporating Ukraine into NATO, which would be oil on the fire for Russia. Adding to this, increasing geopolitical tensions in the Middle East underpin Gas prices as Israel redirects its troops towards the Lebanon border.  

The DXY US Dollar Index, meanwhile, is hovering around 104.00 ahead of the US Consumer Price Index (CPI) print for March, which looks crucial for the interest-rate outlook for the rest of this year. A disinflationary print would fall in line with what the Fed has been communicating. However, any surprise upticks could turn into a massacre for markets as investors could interpret that the US Federal Reserve (Fed) President Jerome Powell and the broader Federal Open Market Committee (FOMC) are making the biggest policy mistake in decades. The release of the Minutes from the recent Fed meeting could ease any extensive moves on the back of the CPI print earlier this Wednesday.

Natural Gas is trading at $2.03 per MMBtu at the time of writing.  

Natural Gas news and market movers: A long shot

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• Bloomberg Intelligence reported in an article this morning that the possibility of Ukraine joining NATO is being considered in diplomatic circles. Although this is still only speculation, it would mean an outright risk of Russia escalating the war in retaliation. Russia completely halting its gas deliveries to Europe or non-Euro countries via Ukraine could be the first in a series of steps as the answer if Ukraine were to join NATO.

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• Yahoo Finance reports that PetroChina is set to place orders for building more LNG ships. This strategy fits with recent reports of China being very active in the European Gas market and means their presence is here to stay.

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• One headwind for Gas prices could come with Israel finally considering a ceasefire in Gaza, though no real deal is in place yet. A ceasefire would ease tensions in the region and could see Gas prices drop back below $2.00. 

Natural Gas Technical Analysis: Revisit of 1982

Natural Gas prices are jumping higher with two main drivers coming out of the geopolitical corner. The idea that Ukraine could be considered to join NATO is a seismic shift in terms of power balances in Europe. It would ask markets to reprice the whole energy complex with both Oil and Gas seeing a massive risk premium priced in over a longer period of time. In the short term, any further upticks will come out of the Middle East after Israel announced it is sending troops to Lebanon under the pretense that Hezbollah is operating there, keeping a potential risk for disturbances in Gas transit in the region. 

With this rally heading into its fourth day, the next key mark on the upside is the historic pivotal point at $2.13. Should Gas prices pop up in that region, a broad area opens up with the first cap at $2.20, near the 100-day Simple Moving Average (SMA).

On the downside, the 55-day SMA around $1.89 should be there as a safety net. Next, the multi-year lows at $1.60 will be acting as support, with $1.65 as the first line in the sand. In case of a breakdown below these levels, traders should look at $1.53 as the next supportive area. 

Natural Gas: Daily Chart, Source: TradingView.