Natural Gas News: Facing Downside Risks with Weak Demand Forecast

Natural Gas Prices Under Pressure with Key Support Level in Focus

U.S. natural gas futures continued a bearish trend on Monday, building on last week’s sell-off. Prices are hovering near a crucial support level at $2.585, a price that could define short-term sentiment. A break below this level may open the door to further downside toward $2.201, while a recovery above it could drive a short-term rally toward $2.764. However, a weak demand outlook driven by warmer-than-average weather and high production levels suggests continued downward pressure.

At 14:09 GMT, Natural Gas futures are trading $2.636, up $0.027 or +1.01%.

Warm Weather Forecast Dampens Demand Expectations

Warmer-than-expected forecasts for early November have softened demand for natural gas, particularly in heating. Both U.S. and European weather models indicate lower heating degree days (HDDs), especially across the South and East, where temperatures are forecasted to range between 60°F and 80°F. Even as some cooler conditions prevail in the West and Central regions, these are insufficient to offset the reduced national demand for heating. NatGasWeather recently revised its HDD outlook down by 11 degrees, compounding bearish sentiment in the market.

High Production and Elevated Storage Pressure Prices

Natural gas production across the Lower 48 states has remained steady, averaging around 102.8 Bcf per day, similar to summer peak levels. This elevated output has kept supply ample ahead of winter. According to the U.S. Energy Information Administration (EIA), a recent storage injection of 78 Bcf brought total storage to 3,863 Bcf—107 Bcf above last year’s levels and 178 Bcf above the five-year average. This oversupply scenario underscores a solid storage cushion, which, coupled with mild weather, limits any significant price upside.

Cash Prices Extend Weekly Losses

Natural gas spot prices declined for the fourth consecutive week, led by downward trends in the East, California, and the Rockies. NGI’s Weekly Spot Gas National Average dropped to $1.330 per MMBtu, reflecting a lack of demand and surplus supply. This sustained weakness in cash prices mirrors the bearish outlook for futures as the market absorbs excess inventory.

Delays in LNG Exports Weigh on Market

Further pressuring natural gas prices, delays at the Golden Pass LNG terminal have limited export demand. With the terminal’s delay, liquefied natural gas (LNG) exports have not offset the surplus supply as anticipated, adding to bearish sentiment in the market.

Market Forecast

The near-term outlook for natural gas prices remains bearish as mild weather and high production keep demand low. Without a significant change in weather or a rise in LNG exports, natural gas is likely to see additional downside with support around $2.201. Traders should watch the $2.585 level closely, as a break above could trigger a temporary short-covering rally, though fundamental pressures point toward continued weakness.