Natural Gas Price Fundamental Daily Forecast – Testing 20-Month Low as Mild Forecasts Extend into Mid-February

Natural gas futures are inching lower on Tuesday, hovering just above a 21-month low reached the previous session. The catalyst behind the early session weakness is forecasts calling for milder weather that should dampen heating demand through the middle of February.

At 11:32 GMT, March natural gas futures are trading $2.625, down $0.052 or -1.94%. On Monday, the United States Natural Gas Fund ETF (UNG) settled at $9.11, down $0.70 or -7.14%.

In addition to the milder weather forecast, gas prices are also being pressured by the growing belief that there will be plenty of gas in storage for the duration of winter. Furthermore, traders are no saying that Freeport LNG’s liquefied natural gas (LNG) export plant in Texas would not start pulling in big amounts of gas until at least March.

Favorable Weather Continues to Weigh on Prices

According to NatGasWeather for Jan. 31-Feb. 5, “A series of frosty weather systems will sweep across the northern and central US this week with rain, snow, and chilly lows of -20s to 20s for strong demand, while aided by lows of 10s to 30s into Texas and the South.

The far West will be comfortable with highs of 40s to 60s, while nice over the Southeast with highs of 60s to 80s.

Cold air will retreat to the northern tier this weekend, while the southern 2/3 of the US warms into the 50s to 70s.

Overall, high-very high demand the next 5-days, then low.”

NatGasWeather added that, “While this week will bring strong to very strong national demand as frigid air sweeps across the northern and central US, the weekend weather data trended notably warmer for Feb. 6-12 to lose number HDDs.” This explains natural gas’ gap lower opening on Monday.

Russian Piped Gas Exports to Europe Falls 30% in January to New Lows

Another reason for the steep losses in natural gas over the past several weeks is lower demand in Europe due to the milder winter and ample supply in the region.

Pipeline natural gas exports to Europe by Russian energy giant Gasprom have declined by almost 30% in January from December amid falling prices at the spot market, hitting a new monthly all-time low, Reuters calculations showed on Tuesday.

According to calculations, based on daily data of Russian gas exports via Ukraine and the TurkStream pipeline, Gazprom’s gas exports to Europe fell in January to some 1.8 billion cubic meters (bcm) from 2.5 bcm in December.

Short-Term Outlook

Fundamentally, natural gas is bearish and the absence of cold weather in the forecast is likely to keep a lid on prices. However, we do concede that oversold technical conditions could fuel a short-covering rally. Furthermore, the wildcard remains the timing of the reopening of Freeport LNG. This may not produce an instant uptrend, but it could slow down the selling.