Natural Gas Prices Forecast: Futures Retreat After Hitting Nine-Month High

Highlights

• Traders are cashing in on natural gas, breaking a four-day rally that took prices to a nine-month high.
• The key driver behind the recent natural gas strength was last week’s bullish EIA report.
• Market sentiment appears to be bearish in the short term, influenced by moderate weather conditions and geopolitical tensions.

Natural Gas Pulls Back

Natural gas futures are trading lower, breaking a four-day winning streak that propelled prices to a nine-month high. Traders are cashing in, influenced by a short-term outlook for moderate demand. At 13:44 GMT, the futures were down $0.077 or -2.28%, standing at $3.305.

Market Factors

Several elements contributed to the retreat in natural gas prices. The decline comes after six consecutive sessions of gains, where prices hit $3.3820/mmBtu, the highest since January. External factors like a 35% hike in European TTF gas prices due to geopolitical tensions and disruptions in supply chains played a part. However, the key driver was last week’s bullish EIA report and cooler temperature trends in the northern U.S.

Weather Outlook

Weather data suggests moderate to seasonal demand for natural gas in the coming week. While the northern U.S. will experience cooler temperatures, the southern U.S. is expected to have comfortable highs, affecting natural gas demand. Additionally, a weak tropical system is projected to bring rain to the Gulf Coast, further moderating demand.

Global Influences

U.S. natural gas futures were also impacted by rising gas prices in Europe and potential tropical cyclones in the Gulf of Mexico. The European gas benchmark soared due to Middle East conflicts and colder weather, while a storm in the Gulf could further tighten supplies.

Short-Term Forecast

The market sentiment appears to be bearish in the short term, with traders taking profits after the recent spike. The presence of moderate weather conditions and geopolitical tensions could continue to influence natural gas prices, making the market volatile for the time being.

Technical Analysis

The current daily price of natural gas at $3.279 sits above both the 200-Day and 50-Day moving averages, at $2.661 and $2.755 respectively, signaling bullish momentum. But the steep vertical movement has put the market in a vulnerable position.

While the market has pulled back from its recent high of $3.382, it’s still holding above minor support at $3.184 and well above the main support at $3.002.

There’s potential for upside movement, if minor and main resistance levels at $3.406 and $3.793 respectively, are overtaken. However, if support fails, the charts indicate a pullback into  the first support at $3.184 is possible, given the early downside momentum.

Given these indicators and the market’s ability to maintain levels above both moving averages and key support, the current market sentiment for natural gas appears to be cautiously bullish.