Natural Gas News: Prices Decline as Warm Weather Forecasts Limit Demand

U.S. Natural Gas Prices Continue to Decline as Warm Weather Forecasts Weigh on Demand

U.S. natural gas prices extended their decline on Friday, signaling continued downside pressure that could potentially test the August 28 low of $2.201. Traders remain focused on selling into any short-term rallies, with resistance at $2.510 acting as a key level to watch. Both the 50-day and 200-day moving averages are also well above current prices, reinforcing the heavy selling pressure across the market.

Weather Weakness and Warmer October Forecasts

The primary driver behind the recent weakness in natural gas futures has been warmer-than-expected weather across much of the U.S. in October. Traders are now weighing the pre-winter market balances, with forecasts pointing to milder temperatures through the rest of the month. This lower-than-anticipated demand for heating has kept prices near even, as the market swings between modest gains and losses.

Natural gas futures initially hovered in a tight range on Friday as traders digested recent storage data from the U.S. Energy Information Administration (EIA) and weather reports from NatGasWeather. Market participants continue to factor in the impact of warmer conditions, limiting expectations for increased heating demand.

EIA Reports Storage Injection, Below Seasonal Norms

On Thursday, the EIA reported a 76 Bcf injection of natural gas into storage for the week ending October 11, a figure largely in line with market expectations but lighter than the usual seasonal norms. This brings the total working gas in storage to 3,705 Bcf, which is 107 Bcf higher than last year at this time and 163 Bcf above the five-year average of 3,542 Bcf.

While inventories remain above both year-on-year and five-year average levels, the report was not enough to shift the bearish market sentiment. The warmer weather is continuing to cap demand, keeping storage levels high ahead of winter.

NatGasWeather Outlook Shows Light Demand Ahead

Looking ahead, forecasts for the next week suggest comfortable temperatures across much of the U.S., with highs ranging from the 60s to 80s, and only cooler conditions near the Canadian border. As a result, overall demand is expected to remain light in the coming days, limiting the potential for a significant rally in prices.

Market Forecast: Bearish Outlook for Natural Gas Prices

Given the ongoing weakness in demand due to unseasonably warm weather and the market’s current oversupply, the outlook for natural gas remains bearish in the short term. With prices below key moving averages and resistance at $2.510, any potential rallies are likely to face selling pressure. The test of the $2.201 support level appears increasingly likely unless weather patterns shift dramatically or demand surprises to the upside. Traders should remain cautious of further downside risk as the market remains in “Sell the Rally” mode.