Natural Gas News: Futures Retreat on Profit-Taking Ahead of EIA Inventory Report

Natural Gas Futures Slide with Key Support in Focus

U.S. natural gas futures are under pressure heading into the weekend, with prices retreating from recent highs. After surging earlier in the week on cold weather forecasts, the market has cooled, with downside momentum nearing key retracement levels. Despite the pullback, natural gas remains positioned for a potential higher weekly close.

Resistance stands at $3.904 and $4.201, with the latter representing the weekly high. On the downside, critical support lies at $3.391 and $3.197—both 50% retracement levels that could attract buyers if tested.

At 14:49 GMT, Natural Gas futures are trading $3.486, down $0.174 or -4.75%.

Storage Surplus Caps Upside Potential

The U.S. Energy Information Administration (EIA) reported a 93 Bcf storage withdrawal for the week ending December 20, falling short of the 100 Bcf consensus estimate. Total working gas in storage sits at 3,529 Bcf, 166 Bcf above the five-year average. This surplus continues to weigh on bullish traders, despite colder weather forecasts.

A larger draw of 127 Bcf is anticipated in today’s EIA report, but the storage overhang may limit significant price advances unless sustained cold weather triggers higher withdrawals.

Cold Weather Sparks Rally but Warmer Updates Slow Momentum

Natural gas futures spiked sharply on Monday, driven by frigid weather forecasts across the U.S. The February contract surged 55.3 cents to settle at $3.936, briefly peaking at $4.201—just shy of the $4.442 resistance level. The market rallied on concerns over potential production freeze-offs and increased heating demand.

However, by Tuesday, profit-taking and updated weather models softened the bullish sentiment. Forecasts for early January moderated, leading to a price pullback below the $3.904 resistance level. European weather models reduced expected heating degree days (HDDs) for the January 5-12 period, prompting traders to trim long positions.

Mexico’s LNG Demand Supports U.S. Prices

Increasing liquefied natural gas (LNG) exports to Mexico provide underlying support to U.S. prices. New Fortress Energy’s Fast LNG facility has boosted feed gas flows from South Texas to record levels, driven by shipments via the Sur de Texas-Tuxpan pipeline. This added demand could help counterbalance domestic supply concerns, lending resilience to the market.

Forecast: Supportive Weather but Resistance Holds

The weather outlook for early January remains a key driver. Cold air sweeping across the Midwest and East from January 3-15 should sustain high national demand, although not as intense as initially forecast.

Prices are likely to retest $4.00 if colder trends persist. However, failure to hold above $3.904 could expose the market to a deeper pullback, with downside targets of $3.391 and $3.197 remaining in play.

More Information in our Economic Calendar.