Natural Gas Prices Forecast: Futures Flat Despite Demand Spike Predictions

Key Points

• U.S. Natural Gas Production Rises, Demand Forecasts Increase
• Biden’s LNG Export Ban Fuels Price Pressure
• Weather Shifts, Plant Issues Stir Natural Gas Volatility

U.S. Natural Gas Futures Stagnate Despite Rising Demand Forecasts

U.S. natural gas futures are experiencing minimal movement, indicating a bearish trend despite predictions of increased demand later in February. This market behavior is influenced by a complex interplay of factors including export policies and weather forecasts.

At 13:18 GMT, natural gas futures are trading $2.023, up $0.014 or +0.70%.

Supply and Demand Trends

The U.S. natural gas production is on the rise, with output in the Lower 48 states climbing to 105.4 billion cubic feet per day (bcfd) in early February, up from 102.1 bcfd in January. Despite this increase, production remains below December’s record high of 106.3 bcfd. Demand is expected to grow, with forecasts predicting a rise from 121.8 bcfd to 124.6 bcfd next week, buoyed by colder weather from February 15-21.

LNG Export Ban Impact

The Biden administration’s indefinite pause on new LNG export approvals is exerting downward pressure on natural gas prices. This move, aimed at assessing environmental and economic impacts, has sparked debate in Congress, with hearings addressing both the economic and environmental implications. The U.S., having been the top LNG exporter last year, faces internal opposition from various industries concerned about rising fuel prices and supply reliability.

Weather Forecasts and Market Reaction

Short-term weather patterns are contributing to market volatility. NatGasWeather forecasts mild conditions across the U.S. until February 13-14, followed by colder weather, boosting demand for natural gas. However, the return of gas wells to service after January’s freeze and ongoing issues at Freeport LNG’s export plant are countering this increased demand.

Short-Term Market Forecast

The market appears bearish in the short term. The combined effects of rising production, the LNG export ban, and fluctuating weather conditions are likely to keep prices under pressure.

The key psychological $2.00 level is under threat, and with March futures nearing a nine-month low, traders should brace for continued volatility. The return of Freeport LNG to full operation later in the month may offer some relief, but the prevailing market sentiment remains cautious.

Technical Analysis

U.S. natural gas futures are trading marginally higher on Wednesday, but on the weak side of the 50-day moving average at $2.070, reflecting the bearish intermediate-term trend. The 50-day MA is both resistance today and a pivot.

A sustained move under the 50-day MA will indicate that the selling pressure is getting stronger. This could lead to a test of the psychological $2.00 level. A trade through this level could trigger an acceleration to the downside.

Overcoming the 50-day MA will shift momentum to the upside. This could spike prices higher and change the trend to up. However, since it’s likely to be weather-related, the move is likely to be limited and short-term in nature.