Natural Gas News: Weather Forecasts Stir Volatility; Reaction to $3.850 Sets the Tone

Natural Gas Futures Edge Lower: Will Bulls or Bears Prevail?

U.S. natural gas futures are under pressure Tuesday, slipping after Monday’s dramatic reversal and gapped opening higher. As the market struggles to maintain momentum, traders are closely monitoring technical and fundamental signals to determine the next move.

At 14:44 GMT, Natural Gas futures are trading $3.827, down $0.107 or -2.72%.

Is $3.850 the Key to Near-Term Direction?

The short-term trading range for natural gas futures currently spans $3.330 to $4.369, with prices straddling the pivotal $3.850 level. This price point is critical for determining the near-term trend: sustained trades above $3.850 could attract buyers, potentially driving prices toward resistance levels at $4.053 and beyond to $4.369-$4.442. However, failure to hold this level suggests bearish control, with a significant downside target at $3.330. Traders are keenly observing whether technical momentum supports a breakout or a breakdown.

Does Weather Still Support High Demand?

NatGasWeather says, frigid temperatures are expected to dominate the interior U.S. through midweek, with lows plunging into the -10s to 20s across key regions, boosting short-term heating demand. While this supports near-term fundamentals, warmer weather patterns are forecasted for late January, with a brief reprieve of moderate demand from Friday into the weekend. However, forecasts signal another Arctic blast immediately after, potentially elevating demand back to high levels. This ebb and flow of weather patterns are keeping market participants cautious about overcommitting to directional trades.

How Are Hedge Funds and LNG Demand Influencing Prices?

Market behavior indicates that hedge funds are actively selling rallies rather than buying dips, contributing to recent price volatility. Additionally, LNG export demand has softened, further weakening price support. Despite colder forecasts for January 19-24, traders are acutely aware that the market trades weather expectations about two weeks in advance. A shift in late-January demand expectations has amplified bearish sentiment, complicating the outlook for sustained upward price moves.

Market Forecast: Bearish or Bullish?

The current sentiment leans bearish as natural gas futures struggle to sustain the $3.850 pivot. Unless buyers regain control and drive prices above key resistance at $4.053, the path of least resistance appears to be lower, with $3.330 as the next significant support level.

Weather-driven demand may provide temporary relief, but the broader trend hinges on how late January forecasts evolve and whether fundamental shifts, such as LNG exports or storage dynamics, bolster support. For now, traders should prepare for heightened volatility and potential further downside in the near term.

More Information in our Economic Calendar.