Natural Gas Prices Forecast: Cold Weather Forecasts Fuel Demand Surge Speculation

Key Points

• 2024 opens with an expected surge in natural gas demand
• Geopolitical, environmental factors sway market
• Bearish outlook persists amid high production, weak demand but upcoming cold forecasts taking centerstage

2024 Opening Rally in Natural Gas Market

The natural gas market has kicked off 2024 with a rally, fueled by forecasts of colder weather in mid-January. This upswing reflects a continuation of the upward trend that began in late December 2023.

Influence of Weather and Geopolitical Tensions

Current market dynamics are heavily influenced by weather forecasts and geopolitical developments. Reports of lower-than-expected US heating demand and potential disruptions in gas flows due to tensions in the Red Sea have significantly impacted prices.

Global Factors and 2023 Bearish Trends

Internationally, China’s return to coal import tariffs, reducing Russian coal imports, could open doors for increased natural gas sales. However, the market is still recovering from a bearish 2023, where natural gas futures saw their largest annual fall since 2006, pressured by record production and high inventory levels.

Current Market Fundamentals and Outlook

The market fundamentals point towards a bearish sentiment. Record gas production and weak demand, both domestic and international, have led to an oversupply. The United States enters the winter with high natural gas storage levels, signaling potential price stability or further declines.

Short-Term Demand and Price Trajectory

The short-term trajectory of natural gas prices will largely depend on the severity of winter weather and LNG export levels. Although demand is expected to rise slightly in the coming weeks, it might not be enough to overturn the overarching bearish trend set by high production and inventory levels.

Technical Analysis

The Natural Gas market, with a current price of 2.580, is trading below both the 200-day and 50-day moving averages, at 3.088 and 2.843 respectively, indicating a bearish trend.

The price is hovering near the minor support and resistance level of 2.590, a critical pivot point. If the price consistently stays below this level, it could indicate further downward movement, heading towards a bearish market sentiment. In contrast, a break above 2.590 might signal a potential shift towards a more bullish sentiment.

However, without significant support or resistance trend lines, the market’s direction could be influenced heavily by external factors and market news like cold weather forecasts and LNG demand.