Natural Gas News: Will Arctic Weather Spark Bullish Momentum and Drive Demand Higher?

Natural Gas Futures Slip as Market Eyes Support Levels

U.S. natural gas futures are trending lower on Friday, retreating from Monday’s high of $4.369 and the multi-month top of $4.442. Despite strong fundamentals earlier in the week, the market is struggling to maintain upward momentum, with traders closely monitoring critical support zones for potential bearish signals.

At 13:19 GMT, Natural Gas futures are trading $4.062, down $0.196 or -4.60%.

Will Key Support Levels Hold the Line?

The first significant support level lies at $4.053, with additional pivots at $3.989 and $3.850. A breach of these levels could signal further downside. Traders should watch last week’s close at $3.989, as a close below this level may form a bearish chart pattern, pointing to weaker near-term price action.

While Thursday’s session saw double-digit gains driven by bullish weather forecasts and a robust storage report, Friday has seen no follow-through, raising concerns about the sustainability of the rally.

Storage Draw and Weather Outlook Fuel Volatility

The Energy Information Administration (EIA) reported a significant draw of 258 Bcf in storage for the week ending January 10, nearly double the five-year average of 128 Bcf. Working gas stocks now stand at 3,115 Bcf, 77 Bcf above the five-year average but 111 Bcf below year-ago levels.

Weather forecasts suggest moderate demand through Saturday before an Arctic Blast pushes demand to very high levels next week. Lows ranging from -20°F to 20°F are expected across much of the U.S., including Texas and the South, reinforcing bullish sentiment for heating-driven demand.

Supply and Demand Dynamics Keep Traders on Edge

Natural gas supply dipped by 0.8% week over week, with dry gas production falling to 102.4 Bcf/d. In contrast, demand rose by 1.3%, driven by a 3.1% increase in residential and commercial use. LNG pipeline receipts hit 15.4 Bcf/d, up 0.3 Bcf/d, as export demand continues to surge.

Exports to Mexico climbed 10%, highlighting strong international demand. However, power generation consumption dropped slightly, reflecting seasonal trends.

Market Forecast: Bullish Momentum Faces Headwinds

While fundamentals like strong storage draws and surging LNG demand provide a bullish backdrop, the inability to sustain gains on Friday suggests caution. If support levels at $4.053 or lower give way, prices could shift bearish in the short term.

However, next week’s Arctic Blast and the potential for further inventory depletion could reignite buying pressure. Traders should remain vigilant, balancing near-term bearish technical signals with bullish seasonal demand and tightening supply.

More Information in our Economic Calendar.