Natural Gas News: Futures Test 50-Day Moving Average as Demand Weakens on Warm Weather

Futures Decline as Weather Outlook Weakens

Natural gas futures slipped on Tuesday, trading below the 50-day moving average of $3.142, with support holding at $3.118 after a test of the 50% retracement level. The downward pressure reflects warmer weather forecasts for mid-December and rising production levels, which are outweighing the current cold weather impacting the U.S.

At 13:39 GMT, Natural Gas futures are trading $3.122, down $0.09 or -2.83%.

Robust Production Meets a Warming Forecast

Natural gas production remains robust, exceeding 103 Bcf/d. Meanwhile, weather forecasts signal a shift. Near-term demand has been strong due to frigid systems bringing rain, snow, and subfreezing temperatures across the Midwest, Ohio Valley, and Eastern U.S. However, updated models show milder conditions arriving by mid-December, curbing the outlook for sustained demand.

NatGasWeather reports high demand through Friday and Saturday due to lows dipping into the single digits and below-zero temperatures in certain areas. However, high pressure systems are expected to dominate much of the western and southern U.S., bringing milder and dry weather with highs of 40s to 70s.

Storage Levels Signal Ample Supply

The latest EIA Weekly Storage Report indicated a net decrease of 2 Bcf, bringing total working gas in storage to 3,967 Bcf as of November 22, 2024. Stocks are 134 Bcf higher than last year and 267 Bcf above the five-year average, underscoring the oversupply in the market. These levels are well above the historical range, suggesting ample inventory to meet winter heating demand.

Key Support and Resistance Zones in Focus

Key technical levels show potential support in the $3.118 to $2.993 retracement zone. Resistance is marked by the 200-day moving average at $3.395 and a pivot point at $3.444. Near-term price direction is likely to be dictated by the 50-day moving average, currently at $3.142, as traders weigh oversupply concerns against intermittent demand spikes from cold weather systems.

Bearish Sentiment Looms Over Short-Term Outlook

With strengthening production and an easing weather outlook, natural gas markets face bearish pressure in the short term. Unless sustained cold weather extends into mid-December, prices are likely to remain capped by resistance levels near $3.395 and $3.444.

More Information in our Economic Calendar.