Natural Gas News: Futures Retreat as Traders Reassess Cold Snap Forecast

Natural Gas Futures Retreat as Cold Snap Volatility Persists

Natural gas futures pulled back Tuesday, cooling after Monday’s sharp rally that saw February contracts surge to multi-month highs. The spike drove prices to $4.201, just shy of the $4.442 resistance level, before retreating below $3.904, now reinstated as key resistance. The rally was fueled by forecasts of severe cold across the U.S. in early January, but warmer updates slowed the bullish momentum.

Natural Gas Futures settled at $3.648, down $0.288 or -7.32%.

Monday’s Rally Fades as Technical Resistance Caps Gains

Monday’s session saw natural gas futures jump 55.3 cents, settling at $3.936 as frigid forecasts raised concerns about production freeze-offs and inventory drawdowns. The U.S. Energy Information Administration (EIA) reported storage levels 166 Bcf above the five-year average, providing some cushion against increased winter demand. Despite this surplus, the potential for record heating demand kept the market on edge.

However, Tuesday’s trading saw prices retrace, driven by profit-taking and mixed weather models. The latest European weather model softened its outlook for the January 5-12 period, giving back several heating degree days (HDDs) compared to earlier forecasts. While the January 3-12 forecast remains cold, its intensity appears to have decreased, prompting traders to reassess long positions.

Market Eyes Weather Models and Technical Levels

Natural gas futures often react strongly to changes in weather data, and the market remains prone to short-term price swings. A colder pattern returning to forecasts could see prices retest $4.00, while sustained moderation could trigger further declines. Downside targets include the $3.391-$3.197 pivot zone, representing a key retracement level.

Mexico’s growing LNG export demand adds another factor to U.S. natural gas fundamentals. New Fortress Energy’s Fast LNG facility in Mexico has increased feed gas flows from South Texas to record monthly highs. This additional demand, driven by exports from the Sur de Texas-Tuxpan pipeline, supports U.S. prices despite domestic supply concerns.

Market Forecast

While natural gas fundamentals remain supportive, the current pullback highlights the market’s sensitivity to changing weather patterns. In the near term, further downside toward the $3.39 pivot is likely if forecasts continue to show warmer trends. However, colder weather could quickly renew bullish sentiment, keeping traders focused on weather models and storage levels.

More Information in our Economic Calendar.