Natural Gas Forecast: Holiday Lull Keeps Natural Gas Prices Steady

Highlights

• Natural gas prices remain unchanged due to minimal weather fluctuations.
• Memorial Day holiday reduces trading activity and potentially affects prices.
• Gas production reaches record high, offsetting recent gains, while milder weather decreases demand.

Overview

Natural gas prices remain unchanged and uneventful in trading today due to minimal weather fluctuations over the weekend. The market is also anticipated to be impacted by the U.S. Memorial Day holiday, resulting in reduced trading activity and potentially affecting prices.

As of 05:41 GMT, the price of natural gas stands at $2.254, marking a decrease of $0.016 or -0.70%. On Friday, the United States Natural Gas Fund ETF (UNG) closed at $6.64, down $0.12 or -1.85%. Throughout the week, the front-month contract experienced a decline of approximately 16%, offsetting the 14% gain observed two weeks prior.

US Natural Gas Futures Plummet on Friday

On Friday, U.S. natural gas futures dropped by approximately 6%, reaching a three-week low. This decline was influenced by various factors, including a sharp decrease in global gas prices, the expiration of a U.S. contract, and record-high gas production in the United States. Increased gas exports from Canada and forecasts of milder weather and lower demand for the upcoming week, including the Memorial Day holiday, further contributed to the price decrease.

Gas Prices Decline Despite Energy Shift

Despite the reduced reliance on wind power and increased gas usage for electricity generation, prices still declined. The final settlement day intensified volatility risks as trading volume decreased for the expiring front-month contract. It’s worth noting that in the past ten expiration days, eight experienced significant price movements. The contract settlement coinciding with the Memorial Day weekend added to the short-term risks. On Friday, trading activity was notably low, with only 2,173 front-month contracts traded compared to the daily average.

Record Gas Production Fuels Exports

According to Refinitiv, gas production in the contiguous United States has been steadily increasing and is currently averaging 101.5 billion cubic feet per day in May, surpassing the previous record set in April. Firefighters in Alberta, Canada, have made significant progress in containing wildfires, resulting in steady gas exports to the United States.

Weather Shifts Impact Gas Demand

Meteorologists are forecasting a shift in weather patterns, with temperatures transitioning from cooler than normal to mostly near normal from May 30 to June 10 in the Lower 48 states. Refinitiv projects a decrease in U.S. gas demand, including exports, from 90.8 billion cubic feet per day this week to 89.7 billion cubic feet per day this week due to milder weather conditions and the Memorial Day holiday. However, gas demand is expected to rise to 93.8 billion cubic feet per day in two weeks as the weather becomes seasonally warmer.

Technical Analysis

Natural gas is trading on the weakside of $2.432 (R1). This is new resistance. A sustained move under $2.432 (R1) will signal the presence of sellers. If this generates enough downside momentum then look for the selling to possibly extend into $2.168 (Pivot), followed by $1.962 (S1).

Overcoming this level will indicate the return of buyers with $2.638 (R2) the next target. Last week’s rally stopped a little short of this level.

For a look at all of today’s economic events, check out our economic calendar.