Natural Gas Prices Forecast: Europe Chills, While US Traders Eye Next Week’s Warm-Up

Key Points

• Cold weather in Europe supports natural gas prices.
• US forecast shift to warmer weather may reduce demand.
• Mixed weather trends could cap natural gas gains.

US Natural Gas Futures Respond to Weather Forecasts

US natural gas futures are experiencing an uptick as traders keep a close eye on upcoming weather forecasts. The market’s attention is drawn to the anticipated warmer trends in the eastern US from January 9-12, potentially reducing demand. The current trading price at 13:31 GMT stands at $2.608, marking a 1.56% increase.

Weather Patterns Influencing Demand

According to NatGasWeather, the focus is largely on varying weather conditions across the US. While the Midwest and East brace for mixed weather, including snow and temperatures ranging from the 20s to 40s, other regions like the West and Plains expect milder conditions. This diversity in weather is likely to lead to a moderate demand for natural gas over the next week.

European Market Reacts to Cold Snap

In Europe, natural gas prices are on the rise due to an intensifying cold snap, which is increasing demand for heating fuel. Benchmark futures have surged by up to 7%, driven by forecasts of sub-zero temperatures across major cities and a predicted increase in heating days.

Renewables and Gas Generation

The expected decline in wind generation in Europe may lead to increased reliance on gas-fired power plants. This shift is anticipated to meet the rising demand during the cold weather, despite the impact on gas balances being mitigated by full storage facilities and ample supplies.

Short-Term Forecast: Limited Upside for Prices

The short-term outlook for natural gas prices remains cautiously optimistic. While the US market reacts to immediate weather changes, European storage levels and consistent supply suggest limited price volatility. Analysts predict that European storage might end the heating season around 50% full, indicating a stable market without significant price surges.  Meanwhile, in the U.S., traders are bracing for the usual winter volatiltiy. With no major cold spell in the outlook, gains are also expected to be short-lived.

Technical Analysis

Trading at 2.609, Natural Gas is below both its 50-day moving average of 2.831 and 200-day moving average of 3.084, indicating bearish sentiment in both short and medium-term outlooks. The current price sits just above the pivot level at 2.590, which is crucial for determining future market direction. With the main resistance level at 2.690, the asset’s position below key moving averages and close to the pivot suggests a potential for continued bearish movement, unless it can breach these levels to signal a shift in sentiment to the upside.