Natural Gas News: Bearish Forecast as Futures Slide Despite Arctic Blast, Milder Weather

Natural Gas Futures Slide as Weather Patterns and Technical Signals Weigh on Prices

Natural gas futures extended their losses on Tuesday, breaking below critical support levels after a gap lower from Friday’s close. The market’s inability to hold key technical levels highlights a bearish momentum shift, while forecasts for milder weather and a unique futures trading perspective among professionals further dampen near-term sentiment.

At 13:40 GMT, Natural Gas futures are trading $3.805, down $0.143 or -3.62%.

Why Are Key Technical Levels Critical for Traders?

Futures have breached two pivotal 50% support levels at $3.850 and $4.043, positioning the market for further declines. A potential test of the January 3 low at $3.330 looms as the next downside target. A recovery above $3.850 would signal the first signs of strength, with a move through $4.053 reinforcing a bullish shift. However, a break below $3.736 would further confirm downside momentum. These technical markers are essential for traders looking to time entry and exit points effectively.

Weather Impact Already Priced In

Although an Arctic blast has gripped the central and eastern U.S., driving temperatures as low as northern Florida, traders have largely dismissed the event’s immediate impact. Unlike other markets, natural gas professionals often sell rallies, guided by short-term forecasts. The futures market’s two-week window has rendered the current cold snap irrelevant, as milder weather predictions for late January have already been factored into pricing. Last week’s rally to $4.369 was met with selling pressure, reflecting this forward-looking strategy.

Storage and LNG Factors Add to Bearish Sentiment

Recent data from the Energy Information Administration (EIA) underscores robust heating demand, with a storage withdrawal of 258 Bcf, nearly double the five-year average. While this signals short-term strength in demand, domestic storage levels remain 77 Bcf above the seasonal average, mitigating supply concerns. Liquefied natural gas (LNG) exports continue to provide a bullish backdrop, supported by European demand amid depleted inventories. However, signs of softening LNG flow and declining power generation demand temper the market’s upside potential.

What Does the Weekly Reversal Signal?

Last week’s close at $3.948, following a high of $4.369, marked a bearish reversal pattern, often preceding extended declines. Traders should heed this signal, as it indicates waning buying interest and reinforces the bearish impact of technical and fundamental factors aligning. Profit-taking and milder weather forecasts have compounded the market’s retreat, underlining its sensitivity to rapid sentiment shifts.

Market Forecast: Bearish with Risks of Volatility

Natural gas futures are likely to face additional downward pressure, with support at $3.330 as the next critical level. However, volatility remains a risk, as unexpected weather developments or surging LNG demand could reignite buying interest. For now, the market leans bearish, emphasizing the importance of close monitoring of weather updates and storage data to navigate the near term effectively.

More Information in our Economic Calendar.