Natural Gas Prices Forecast: Bearish Weather and European Dip Pressure Futures

Highlights

• U.S. Natural Gas futures slide nearly 3%, as traders weigh a surplus and bearish weather outlook.
• European influences cast a shadow over U.S. gas prices, marked by falling Dutch and British contracts.
• Warmer weather forecasts for late October and early November signal weaker demand for heating.

Natural Gas Futures Slip Amid Bearish Weather and European Price Dip

U.S. natural gas futures started the week on a back foot, shedding nearly 3% as traders weighed bearish weather forecasts and falling gas prices in Europe. The market’s trajectory appeared firmly influenced by weakening demand and an oversupplied scenario. November futures were last seen at $3.142, marking a decline of $0.094 or -2.90% as of 11:58 GMT.

The European Effect

European factors played a significant role in influencing U.S. prices. Both Dutch and British wholesale gas markets retreated from last week’s highs, pressured by abundant LNG supplies and favorable storage levels. Dutch November gas contracts fell to 52.45 euros per MWh, and Britain’s day-ahead contract decreased to 128.00 p/therm. This marks a sharp turnaround from the previous rally ignited by geopolitical unrest and colder weather.

Weather and Demand Woes

Compounding the downward pressure, weather forecasts for the U.S. offer no bullish reprieve. Contrary to last week, lower heating demand forecasts and warmer temperature projections for late October and early November signal weakening demand. The frost observed recently is expected to be short-lived, reverting to seasonal norms by week’s end.

Supply Side Factors

On the supply front, uncertainties loom as Chevron’s Australian LNG facilities face potential strikes. Further, Israel’s halt in gas exports to Egypt through a key pipeline and damage to the Balticconnector gas pipeline have stirred supply concerns. However, these are offset by European storage inventories at record levels and ongoing supply expected to meet demand until 2025-26.

Short-term Outlook: Bearish

Given the factors of falling European prices, bearish weather forecasts, and unresolved supply-side uncertainties, the near-term outlook for U.S. natural gas futures is decidedly bearish. Traders should eye Chevron’s labor negotiations and weather updates for any disruptive cues, but for now, the trend is downward.

Technical Analysis

The current daily price of natural gas at 3.162 sits above both its 200-day moving average of 2.635 and its 50-day moving average of 2.799, signaling overall bullish momentum.

However, the price is below the minor support level of 3.184 and has retreated from the previous daily price of 3.236, indicating short-term selling pressure. It remains above the main support level of 3.002, offering a cushion against a deeper decline.

Given these factors, the market sentiment for natural gas could be interpreted as cautiously bullish, but vulnerable to a steep short-term break given the position of the 50-day moving average.