Natural Gas News: Futures Test Resistance as Cold Weather Threatens Supply and Production

U.S. Natural Gas Futures Rise on Colder Weather Forecasts

U.S. natural gas futures climbed on Thursday, recovering from earlier declines, as forecasts of colder-than-expected weather in January drive market sentiment. The rally is pushing prices toward resistance levels at $3.904 and $4.201, with a potential test at the multi-month high of $4.442. Support remains at $3.391 and $3.197, while stronger backing lies around the 200-day moving average at $2.981 and the 50-day average at $2.832.

At 13:15 GMT, Natural Gas futures are trading $3.695, up $0.062 or +1.71%.

Colder Weather Fuels Bullish Sentiment

Natural gas prices surged over 20% on Monday after updated forecasts projected arctic conditions could bring the coldest January the U.S. has seen in over a decade. Although prices retracted slightly on Tuesday and Thursday, the potential for further spikes remains high. Traders are closely monitoring storage levels and demand, with the risk of severe cold rapidly depleting reserves. A prolonged deep freeze could not only accelerate drawdowns but also disrupt production as infrastructure faces freezing conditions, potentially forcing well shutdowns.

Global Supply Concerns Add Pressure

Europe faces similar challenges, with forecasts predicting colder weather linked to polar vortex activity. This adds pressure to an already strained European market, where storage levels are declining rapidly. The situation is further complicated by Gazprom’s plan to halt gas deliveries via Ukrainian pipelines, following the expiration of its transit agreement. This disruption, coupled with reduced LNG exports from the U.S. due to President Biden’s pause on new export permits, heightens supply concerns for global markets.

Domestic Demand to Drive Prices Higher

Domestically, as temperatures drop, utilities are bracing for increased consumption, with Americans expected to turn up their thermostats. While retail price impacts may take months to materialize, immediate usage spikes will likely drive heating bills higher across colder regions. The combination of elevated demand and rising wholesale prices creates a dual impact on consumers, amplifying heating costs.

Market Forecast

Natural gas markets are expected to remain bullish in the short term, driven by colder weather and heightened demand. Traders anticipate further upside if weather models continue to predict prolonged arctic conditions. However, any price corrections could attract buyers, particularly if support near the $3.39-$3.19 range holds. With cold fronts sweeping across key regions, sustained price strength appears likely through January.

More Information in our Economic Calendar.