Natural Gas News: Bearish Outlook Persists—Will Colder Forecasts Reverse the Trend?

U.S. Natural Gas Futures Edge Lower as Colder Forecasts Temper Market Rally

U.S. natural gas futures are pulling back Tuesday, reversing earlier gains as bearish fundamentals weigh on the market following a notable relief rally on Monday. While natural gas prices initially climbed on hopes of colder weather, they failed to reach the resistance target between $3.044 and $3.049 and are now retreating toward the next support level near $2.825. If this support gives way, traders could see prices dip further, testing Monday’s gap between $2.769 and $2.748.

Bearish Fundamentals Dampen Rally Potential

Monday’s rally was fueled by a shift in weather forecasts that initially raised demand expectations, adding 10 heating degree days (HDD) to post-weekend forecasts. However, updated forecasts early Tuesday signaled a more complex temperature outlook, which dampened momentum. While the American forecast model leaned warmer for the 9- to 15-day period, the European model remained colder, mainly due to a system expected to reach the U.S. later this month. This forecast divergence has made traders cautious, with lingering bearish fundamentals still limiting upside movement.

Weather Forecasts Signal Divergence Between Models

According to NatGasWeather, the outlook for Nov 12-18 indicates mixed conditions. Weather systems bringing rain and snow to the western and northern U.S. could generate modest demand, but high pressure over the southern U.S. will keep temperatures warm, reducing overall heating needs. While the weekend data trended colder with a system anticipated in the central and eastern U.S. for Nov 20-24, the two primary weather models show diverging trends. The Global Forecast System (GFS) predicts significantly colder weather than the European model (EC) during this period, showing 10 additional HDDs. This gap in predictions will be closely monitored, as it could influence near-term pricing if one model’s outlook prevails.

Colder Weather Could Spur Short-Covering but Not a Strong Rally

Despite Tuesday’s pullback, colder-trending forecasts for late November are providing limited support. Monday’s short-covering rally led December 2024 contracts 10% higher as traders covered positions in anticipation of stronger heating demand. However, if the European model trends warmer, or if the GFS forecast reverses to align with a less aggressive cold forecast, natural gas prices could weaken further, likely testing lower support levels.

Market Forecast

Given the bearish fundamentals and uncertainty in weather forecasts, natural gas futures face a bearish outlook in the near term. Unless colder weather materializes consistently across forecasts, support around $2.825 may not hold, potentially leading to a price test near $2.769. Traders should watch the model alignment closely, as a consensus on colder weather would be necessary to sustain any substantial price rally.