2024 Natural Gas Market Forecast: Targeting $3.85 High

2024 Natural Gas Market Forecast Video by Bruce Powers

2023 Market Recap

Natural gas prices are set to end 2023 down by approximately $1.93 or 43% for the year. In 2022 trading ended at $4.475, which turned out to be almost in the middle of a downtrend that dominated price behavior until the first trend low of $1.97 was reached on February 22, 2023. That low completed an 80.4% decline from the $10.03 peak hit in August 2022 and it was followed by a sharp 53.9% rally in only seven days. Subsequently, natural gas continued to sell off until reaching a slightly new trend low of $1.95 on April 14. That put it 80.6% below the $10.3 peak from August 2022. The size of the correction on a percentage basis was near the top end of all major corrections for natural gas since at least 2001, providing one of the clues that the correction may be over.

A rising parallel trend channel followed until a bearish breakdown of the pattern occurred on November 27. The rising channel can also be considered as a large bear flag. The high for the rally from the $1.95 low was $3.64, thereby completing an 87.2% advance. Following the breakdown of the rising channel natural gas fell to a low of $2.235 before finding support and bouncing. That decline completed a 78.6% Fibonacci retracement. It also tested the long-term downtrend line as support, which marks dynamic support moving forward.

Weather Impact

According to S&P Global warmer weather forecasts in the US and Europe have contributed to recent lower prices in the energy complex, including natural gas. However, the U.S. Climate Prediction Center anticipates the effects of El Nino weather pattern will keep temperatures above average in much of North America for the first quarter of the year. This may not be enough to impact prices much in the first half of 2024 and downward pressure may remain. On a technical analysis basis natural gas would be bouncing into resistance areas.

Market Risks and Opportunities

Supply is anticipated to keep up with demand for much of 2024. Natural gas storage inventories are expected to remain higher than the five-year average throughout 2024, according to the Energy Information Administration. This could maintain downward pressure on prices for the first half of the year, which would be consistent with natural gas trading in a consolidation range.

Technical Analysis Forecast for 2024

On a technical basis natural gas is sitting at an interesting location between resistance at the 200-Day MA (blue) and the most recent swing high of 2.62, and support at the recent retracement low of 2.235 and the long-term downtrend line. It is also sitting just below the 50-Week MA at 2.63. Prior to the formation of the rising bear flag pattern natural gas had a sharp decline of $4.25 or 68.4% in 44 days (begun December 19, 2023). We can consider this the pole portion of the bear flag pattern. Typically, following a breakdown of a rising flag the expectation is for an eventual continuation of the declining trend. That will happen on a drop below $1.95.

Although a bearish continuation below $1.95 may occur there is a chance that the recent low completes the breakdown. That is my expectation currently. Bullish trend signals triggered in late-September and early-October as natural gas rose above both the 200-Day MA and the downtrend line. In addition, a breakout above the 50-Week MA triggered. Once natural gas gets back above the 200-Day MA, it will be above all three trend indicators again. Moreover, the weekly chart shows a bottom hammer candlestick pattern that triggered a bullish reversal two weeks ago on a move above $2.54. It was confirmed with a weekly close above the level last week.

If the recent low holds, then natural gas has a chance to trade within a range from the $2.235 low to the 2023 high of $3.64 heading into 2024, with the possibility of a bullish trend continuation above $3.64. It is forecasted to reach a high of $3.85 for 2024. Hitting that target would complete a 23.6% Fibonacci retracement of the internal downtrend starting from the November 2022 swing high. It also matches the 200-Week MA at 3.83. A large rising ABCD pattern completes a little lower at 3.74.