Natural Gas price surges higher on Thursday supported by lower-than-expected Natural Gas Storage Change data from the Energy Information Administration (EIA) and a weaker US Dollar following the European Central Bank (ECB) interest rate decision. The weekly EIA data showed a lower-than-expected 84B cubic feet of Gas in storage in the week ending June 9, indicating demand outweighed supply. 

Early on Thursday, Natural Gas rose after the ECB raised interest rates by 0.25%, as expected, and revised up its core inflation forecasts, thus paving the way for hikes in the future. This strengthened the Euro and led to a steep decline in the US Dollar Index (DXY), buttressing Natural Gas which is mainly priced and traded in USD. 

XNG/USD saw further gains after a market heavily commited to the short side was caught in a short squeeze by the news that outages at the Nyhamna Gas processing plant in Norway. 

At the time of writing, Natural Gas is trading over 9% higher on the day at $2.594 MMBtu. 

XNG/USD saw further gains after a market heavily commited to the short side was caught in a short squeeze by the news that outages at the Nyhamna Gas processing plant in Norway. 

At the time of writing, Natural Gas is trading over 9% higher on the day at $2.594 MMBtu. 

Natural Gas news and market movers 

- Natural Gas rises strongly on the back of lower-than-expected Natural Gas storage data from the week ending June 9 and a weaker US Dollar. The EIA inventory data showed a fall to 84B cubic feet when a lesser decline to 95B had been expected from 104B in the previous week. The data suggests demand outweighs supply. 

- News of a technical issue at the Nyhamna Gas processing plant in Norway brought into doubt confidence in Norwegian supply. News that the maintenance issue would require over a month to resolve, during which time the plant would be outed, was a further negative for supply. 

- The Commitment of Traders (COT) report from the CFTC for the previous week showed Natural Gas traders were heavily short the commodity, laying the foundation for a short squeze higher on the Nyhamna news. 

- Natural Gas rose following the ECB meeting and decision to increase all three of its key interest rates by 0.25%, to 4.00%, 4.25% and 3.50% for the main refinancing, marginal lending and deposit facilities respectively. 

- More importantly the ECB revised up its forecasts for core inflation in 2023-4. 

- This will probably lead to higher interest rates in the future and contrasts with the US Federal Reserve’s relatively less hawkish outlook. 

- A key phrase in the ECB’s monetary policy statement was, “The Governing Council’s future decisions will ensure that the key ECB interest rates will be brought to levels sufficiently restrictive to achieve a timely return of inflation to the 2% medium-term target and will be kept at those levels for as long as necessary."

- That said, the ECB also revised down growth estimates for 2023-4 – a dovish sign. 

- In her press conference after the decision, ECB President Lagarde left the door open to more hikes in the future, said the labor market was 'on fire', that inflation would probably remain sticky for some time and the ECB still had more work to do.

- Natural Gas price is further underpinned by a mixture of increased Asian demand, forecasts of hotter weather, Russian pipeline disruptions and Norwegian outages.