Natural Gas News: Oversupply and Mild Weather Keep Futures Under Pressure

Loose Fundamentals Pressure Prices

U.S. natural gas futures dropped sharply on Tuesday as bearish fundamentals continued to overshadow short-term cold weather forecasts. Strong production levels persist, while LNG export demand remains subdued, contributing to oversupply concerns. According to EBW Analytics Group, the market remains on alert for potential disruptions caused by severe cold in January, but near-term fundamentals indicate a well-supplied market.

At 14:27 GMT, Natural Gas futures are trading $3.077, down $0.105 or -3.30%.

Weather updates have done little to offset the bearish outlook. While recent forecasts added approximately 20 Heating Degree Days (HDDs) over the weekend, mild conditions across the southern and eastern U.S. have tempered demand. A brief cold front is expected to sweep the Midwest and East from December 20-23, with lows of -0°F to 20°F in the Midwest and the South seeing brief drops into the 20°F-30°F range. However, the broader 15-day outlook suggests limited sustained cold, keeping demand tepid.

Monday’s Higher Opening Fizzles

Natural gas futures opened higher on Monday following colder weekend weather forecasts but failed to maintain the gains, settling at $3.182/MMBtu after an intraday high of $3.324/MMBtu. The early rally reflected a short-lived reaction to increased HDDs, but traders quickly absorbed the outlook, reverting to a more cautious stance.

Technical Outlook Highlights Downside Risks

Technically, futures have returned to key support levels. The January Nymex contract is testing the 50-day moving average at $3.104/MMBtu and the 50% retracement level at $3.118/MMBtu. A sustained break below these levels could push prices toward the Fibonacci level at $2.993/MMBtu, which analysts see as a critical point for further selling pressure.

However, a sustained move above $3.118/MMBtu would indicate buying interest and could signal a potential bullish reversal. Traders are closely monitoring the $3.118 to $3.094/MMBtu range, with a bearish tone likely to dominate below $3.104/MMBtu.

Market Outlook: Bearish with Limited Upside

The near-term outlook for natural gas remains bearish as robust supply and weaker LNG demand offset weather-driven demand increases. Prices could face further downside if technical levels are breached, with the next key target at $2.993/MMBtu. A sustained recovery above $3.118/MMBtu would be necessary to shift sentiment toward a bullish stance.