Natural Gas Futures Remain Under Pressure On Mild Weather

Mild Weather And Decent Inventory Levels Put Pressure On Natural Gas Futures

U.S. Natural gas futures remain under pressure today as weather is expected to stay mild at the end of October and in early November. Natural gas futures have recently made an attempt to settle above $6.00 but lost momentum and moved closer to the $5.00 level as traders focused on weather forecasts.

Interestingly, the situation is completely different in Europe where natural gas prices rallied after Gazprom did not book additional capacity on pipelines that ship gas to Europe.

The difference between natural gas price dynamics in U.S. and Europe is explained by the major difference in gas inventory levels. The U.S. is ready for the start of the winter heating season in November while Europe’s natural gas inventories are materially down from their normal levels.

Natural gas is much more expensive in Europe and Asia than in the U.S. so foreign buyers will likely try to buy as much U.S. gas as they can. However, LNG capacity is limited, and it remains to be seen whether these purchases will make a material difference for the domestic market in the upcoming weeks.

Technical Analysis

Natural gas futures managed to settle below the 20 EMA near $5.40 and are moving towards the next support level which is located at the 50 EMA near $5.00. RSI remains in the moderate territory, and there is plenty of room to gain additional downside momentum in case the right catalysts emerge.

If natural gas futures decline below the 50 EMA, they will head towards the next support level at $4.75. A move below this level will push natural gas futures towards the support at $4.55.

On the upside, the previous support at the 20 EMA will serve as the first resistance level for natural gas futures. A move above this level will push natural gas futures towards the resistance at $5.80. In case natural gas futures settle above $5.80, they will head towards the next resistance level at $6.00.

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