Natural Gas News: Market Braces for Volatility as Weather Shifts Impact Forecast

U.S. Natural Gas Edges Higher as Market Weighs Weather and Supply Signals

U.S. natural gas futures posted modest gains early Friday, showing resilience despite Thursday’s bearish technical pattern. After reaching a 2-year high, March natural gas futures dropped 2.99% to settle at $4.152, as warmer weather forecasts prompted long liquidation. Traders are now eyeing key technical levels, with a trade through $4.034 potentially signaling a short-term correction, while breaking $4.476 could reignite the uptrend.

At 13:30 GMT, Natural Gas Futures are trading $4.195, up $0.043 or +1.04%.

Will Warmer Weather Undermine Nat-Gas Bulls?

The natural gas market’s recent rally has been largely driven by a frigid Arctic blast across much of the eastern U.S. However, Maxar Technologies’ updated forecast for milder weather from February 25 to March 1 could dampen heating demand, triggering Thursday’s sell-off. The retreat from the $4.476 resistance level underscores the market’s sensitivity to weather forecasts, with traders bracing for potential downward pressure if temperatures moderate further.

How Tight Are Natural Gas Supplies?

Despite the weather-driven pullback, supply tightness continues to support natural gas prices. The latest U.S. Energy Information Administration (EIA) data showed a larger-than-expected inventory draw of 196 billion cubic feet (bcf) for the week ending February 14, outpacing forecasts of 193 bcf and the five-year average draw of 145 bcf. As of mid-February, natural gas inventories were 5.3% below their five-year average, marking the tightest supply conditions in over two years.

Could LNG Export Policy Boost Demand?

In a potentially bullish development for natural gas, President Trump’s decision to lift the Biden administration’s pause on approving liquefied natural gas (LNG) export projects could bolster demand. The market is particularly focused on the possible approval of the Commonwealth LNG export facility in Louisiana. With increased U.S. LNG export capacity, domestic natural gas could see heightened demand from global markets, adding a layer of support to prices.

What Do Production and Demand Numbers Suggest?

Production and demand metrics present a mixed picture. Lower-48 state dry gas production stood at 101.1 bcf/day, down 3.9% year-over-year, while demand surged 39.3% to 129.8 bcf/day. Additionally, LNG net flows to export terminals were up 0.4% week-over-week at 15.3 bcf/day. The Edison Electric Institute also reported a 10.9% year-over-year increase in U.S. electricity output, highlighting robust utility-driven demand for natural gas.

Market Forecast: Cautiously Bullish with Volatility Ahead

While the immediate outlook hinges on weather developments, natural gas prices remain supported by tight supplies and potential policy-driven demand increases. Traders should watch for a break above $4.476 for a bullish signal, though resistance at $4.714 and $4.805 may cap gains. Conversely, a slip below $4.034 could initiate a short-term pullback toward the $3.733 support level. Overall, the market sentiment skews cautiously bullish, but volatility could remain high in the near term.

More Information in our Economic Calendar.