Natural Gas News: Bearish Momentum Builds on Milder Weather Forecast

Futures Weighed Down by Warm Weather Forecasts, Higher Production

U.S. natural gas prices declined on Friday, trading near $2.977, slightly above the week’s low. The market is poised to close lower for the week as traders maintain prices within the short-term retracement zone of $3.118 to $2.993. Prices remain under the 50-day moving average at $3.120, signaling resistance to further gains.

A move above this level could pave the way toward the 200-day moving average at $3.385, though this would require a bullish catalyst. Conversely, a breach below $2.993 could prompt stronger selling, potentially pushing prices toward $2.762, with warmer weather and robust production as likely drivers.

At 15:10 GMT, Natural Gas futures are trading $3.055, down $0.024 or -0.78%.

Inventory Data Misses Expectations

The latest Energy Information Administration (EIA) report revealed a 30 Bcf draw in storage, below expectations of a 38 Bcf decrease. Working gas in storage now stands at 3,937 Bcf, exceeding last year’s levels by 185 Bcf and the five-year average by 284 Bcf. Despite the looser storage draw, natural gas futures rallied modestly midweek, supported by strong LNG demand. However, forecasts for milder December temperatures have tempered bullish sentiment, leading to renewed selling pressure.

Weather Outlook and Demand Trends

The eastern U.S. is experiencing frosty conditions, supporting high natural gas demand through the weekend. Temperatures are set to rise into the 40s-60s by next week, transitioning demand to moderate levels. Long-range weather models continue to trend warmer, signaling weaker demand over the 8–15-day period, further pressuring prices.

Geopolitical and Export Factors

In Europe, uncertainty surrounding the expiring Russia-Ukraine pipeline agreement adds a geopolitical layer to the energy market. If Ukraine halts gas transshipments from Russia by December 31, countries like Austria and Hungary could face supply challenges, emphasizing U.S. LNG exports’ importance. American producers stand to benefit from higher export volumes as Europe reduces reliance on Russian energy, bolstering global demand for U.S. natural gas.

Market Forecast

Natural gas markets are likely to remain under pressure in the short term. Warmer weather, higher production, and ample storage levels support a bearish outlook. However, geopolitical risks and a potential shift in weather patterns could introduce volatility, providing traders with opportunities to capitalize on price fluctuations.