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Breaking News: Biden’s LNG Export Moratorium to Remain Until After Elections, Causing Natural Gas Prices to Plummet Below $2

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  • Natural Gas sinks on reports that the Biden administration is set to prolong the LNG export moratorium by 9 to 12 months. 
  • Traders are looking at the Capitol Hill hearing later this Wednesday for possible oppositions or workarounds. 
  • The US Dollar Index flirts with a break below 104 as the Greenback fails to find nearby support.

Natural Gas (XNG/USD) falls lower and snaps back below $2 just minutes after research firm Capstone LLC reports that the Liquified Natural Gas (LNG) export moratorium from the Biden administration is due to stick in place for at least 9 to 12 months. That means the LNG ban stays in place even until after the elections. The report comes just hours before a special subcommittee is to take place on the matter at Capitol Hill. 

The US Dollar (USD) is feeling this  deescalation in geopolitical tensions with some safe haven outflows. This makes the Greenback, which is negatively correlated to Natural Gas, retreat from Monday’s highs and search for support. The 104 marker does not look that solid and could give way, seeing the US Dollar devalue just a little bit more before finding some solid support in the form of  the 200-day SMA near 103.59. As for market-moving events, no less than three US Federal Reserve members are due to speak this Wednesday. 

Natural Gas is trading at $1.98 per MMBtu at the time of writing.  

Natural Gas market movers: Biden’s moratirium stays in place

  • Tensions are high at Capitol Hill across political sides with US President Joe Biden’s gas export ban, with a House Energy and Commerce subcommittee hearing taking place this Wednesday.
  • Qatar agreed to lower its Liquified Natural Gas (LNG) prices in a longer term agreement with India. Petronet concluded the contract with the Emirate for 7.5 million tons of LNG per year for 20 years.
  • The UK has concluded a deal to sell 1 million tons of LNG with Repsol, between 2025 and 2027.
  • Norway’s biggest Oil and Gas company Equinor ASA, saw its profits fall in the fourth quarter due to substantially lower Gas prices on global markets. 

Natural Gas Technical Analysis: testing sub $2

Natural Gas is trading in very difficult circumstances to stage a rally in any form or way. Beside the sluggish demand in Europe, markets are starting to consider that even the fact that ceasefire talks are ongoing in the Middle East is a good thing. Where questions on a possible deal were considered a risk and pushed gas prices up, this week signs of talks are considered a good thing with all parties still talking and trying to work out an agreement, which is negative for gas prices for now. 

On the upside, Natural Gas is facing some pivotal technical levels to get back to. First, the low of January at $2.10 needs to be reclaimed again. Next is the intermediary level near $2.48. Once that area gets hit, expect to see a test near $2.57 at the purple line.

Once the current low at $2.04 gets tested, or broken again, expect the $2.00 big figure to crack under pressure as well. The first level to look for on the downside is near $1.95 (orange level) which goes back to August 2020. Next is the red line near $1.51, the low of June 2021. 

XNG/USD (Daily Chart)

Natural Gas FAQs

Supply and demand dynamics are a key factor influencing Natural Gas prices, and are themselves influenced by global economic growth, industrial activity, population growth, production levels, and inventories. The weather impacts Natural Gas prices because more Gas is used during cold winters and hot summers for heating and cooling. Competition from other energy sources impacts prices as consumers may switch to cheaper sources. Geopolitical events are factors as exemplified by the war in Ukraine. Government policies relating to extraction, transportation, and environmental issues also impact prices.

The main economic release influencing Natural Gas prices is the weekly inventory bulletin from the Energy Information Administration (EIA), a US government agency that produces US gas market data. The EIA Gas bulletin usually comes out on Thursday at 14:30 GMT, a day after the EIA publishes its weekly Oil bulletin. Economic data from large consumers of Natural Gas can impact supply and demand, the largest of which include China, Germany and Japan. Natural Gas is primarily priced and traded in US Dollars, thus economic releases impacting the US Dollar are also factors.

The US Dollar is the world’s reserve currency and most commodities, including Natural Gas are priced and traded on international markets in US Dollars. As such, the value of the US Dollar is a factor in the price of Natural Gas, because if the Dollar strengthens it means less Dollars are required to buy the same volume of Gas (the price falls), and vice versa if USD strengthens.

In a major development in the energy sector, the Biden administration has announced that the moratorium on new oil and gas leases on federal land will remain in place until at least after the 2022 elections. This decision is seen as a significant setback for the natural gas industry and will likely lead to a sharp decline in natural gas prices in the coming months. This move has sparked a heated debate, with some applauding the decision while others raising concerns about the potential consequences for the industry and the economy as a whole. In this article, we will take a closer look at this breaking news and its potential impacts.

What is the Moratorium and Why is it Being Extended?

The moratorium on new oil and gas leases was initially announced in January 2021 as part of President Biden’s executive order to combat climate change and reduce carbon emissions. The original plan was for the moratorium to last for 60 days, during which a comprehensive review of the federal oil and gas leasing system would take place. This decision was met with fierce opposition from oil and gas companies and Republican lawmakers, who argued that it would harm the economy and lead to job losses in the energy sector.

However, the recent announcement by the Department of the Interior shows that the moratorium will continue until after the 2022 elections, which is in line with President Biden’s campaign promise to halt new oil and gas leases on federal land. The administration has cited the need for further review and input from stakeholders, as well as a focus on promoting clean energy solutions, as reasons for the extension.

Impact on Natural Gas Prices

The decision to extend the moratorium is expected to have a significant impact on natural gas prices. With the natural gas industry heavily reliant on federal lands for production, the limitation on new leases will undoubtedly lead to a decline in natural gas supply. As supply dwindles, prices will plummet, especially in regions that are heavily dependent on federal land for natural gas production.

As a result, analysts and industry experts foresee natural gas prices dropping below $2 per thousand cubic feet (mcf) in the short term, a significant drop from the current price of around $3.50 per mcf. This could provide a financial reprieve for consumers who rely on natural gas for heating, cooking, and electricity, but it spells trouble for the natural gas industry and could lead to significant job losses in the sector.

Industry Response and Concerns

The announcement of the extension of the moratorium has been met with mixed reactions from industry stakeholders. Environmental groups and advocates for clean energy have praised the decision, arguing that it is a crucial step towards reducing carbon emissions and addressing climate change. However, the oil and gas industry and its supporters have expressed concerns about the potential consequences, particularly in terms of job losses and economic impacts.

According to Larry Fink, CEO of BlackRock, the world’s largest asset manager, the extension of the moratorium could lead to a shortage of natural gas supply, causing prices to rise in the long term. This could potentially have a ripple effect on the economy, as natural gas is a key input in many industries, including manufacturing, transportation, and electricity production.

Furthermore, the moratorium has also raised concerns about the United States’ ability to meet its energy needs in the long term. With the country’s growing demand for energy and imports of natural gas from other countries, the limitations on domestic production may lead to dependence on foreign sources, making the country vulnerable to political and economic factors beyond its control.

What’s Next for the Natural Gas Industry?

As the moratorium continues, the natural gas industry faces an uncertain future. Some companies may decide to shift their focus to renewable energy sources, diversify their investments, or explore production opportunities outside of federal lands. However, for other companies, the moratorium may lead to layoffs, downsizing, and even bankruptcy, particularly for those who heavily rely on federal land for their operations.

In a rapidly changing energy landscape, it is crucial for the natural gas industry to adapt and evolve to remain competitive. This may involve investing in clean energy solutions, exploring new technologies, or expanding operations to other regions with less reliance on federal lands. Additionally, the industry can also work with the government to find a balance between promoting clean energy and protecting the interests of the natural gas sector.

Conclusion

The announcement of the extension of the moratorium on new oil and gas leases on federal lands until after the 2022 elections has caused a stir in the energy sector. While it may lead to a short-term decline in natural gas prices and benefit consumers, it also raises concerns about the long-term impacts on the industry and the economy. As we continue to navigate a changing energy landscape, finding a balance between promoting clean energy and supporting the natural gas sector’s viability is crucial. All eyes will be on the Biden administration and its next steps regarding this moratorium, as it will have far-reaching effects on the energy industry and the nation’s future.

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