Natural Gas Prices Forecast: Cold Snap Forecast Triggering Short-Covering Rally

Highlights

• Cold forecast boosts U.S. gas futures.
• EIA storage report influences market.
• LNG exports set new U.S. records.

U.S. Natural Gas Futures React to Cold Snap

U.S. natural gas futures have ticked upward the past two sessions as revised forecasts predict colder temperatures than previously anticipated, sparking a surge in demand expectations. This adjustment follows a consistent trend of increasing heating requirements as the nation approaches the heart of the winter season.

Weather Forecasts Impacting Gas Prices

Market movement has been directly influenced by NatGasWeather’s reports, which show an uptick in Heating Degree Days (HDDs), a measure of demand, particularly over the next 8-15 days. Despite a short-term outlook of light demand, the forecasts have shifted from bearish to more balanced as seasonal demand aligns closer to expectations.

EIA Report and Storage Dynamics

The rally in gas futures also comes ahead of the Energy Information Administration’s (EIA) resumed weekly gas storage report, with analysts anticipating the season’s first withdrawal followed by a reinjection due to milder weather. This data is a key component in shaping supply expectations.

Supply and Demand Outlook

Recent records in gas production are juxtaposed with projections of warmer weather through mid-November, which may suppress demand until a predicted cooldown. Despite a temporary dip during the Thanksgiving holiday, overall demand forecasts are on the rise, bolstered by robust LNG exports.

Export Trends and Market Sentiment

As U.S. LNG export levels reach new highs, pipeline exports to Mexico have decreased, with expectations of a rebound when new liquefaction capacities come online. The market sentiment, while cautious of fluctuating temperatures and holiday impacts, remains attuned to these supply and demand dynamics, with a watchful eye on the potential for increased export-driven demand.

Technical Analysis

Natural gas futures are currently trading in a tight range, just above the minor support level of 3.184. The asset is hovering close to the 50-day moving average of 3.015, suggesting a neutral short-term momentum, yet it remains above the 200-day moving average, indicating a potential underlying bullish trend over a longer period.

With the price positioned near minor support, the market sentiment seems cautiously optimistic, yet a break below this level could shift sentiment to bearish. Conversely, a move towards the minor resistance at 3.434 may reinforce a bullish outlook, with the main resistance at 3.793 serving as a key target for confirming a stronger bullish trend.