Natural Gas Prices Forecast: Lower as Weather Outlook Dampens Trader Optimism

Highlights

• US natural gas futures fall by 5.26%.
• Warm December impacts market demand expectations.
• EIA reports stable gas supply, but output remains high.

Price Drop Signals Bearish Weather Forecasts

U.S. natural gas futures experienced a significant 5.26% drop on Tuesday, indicating a volatile close to 2023. This downturn comes despite last week’s uptick, which broke a six-week losing streak. The decline aligns with unexpectedly bearish weather forecasts predicting light demand through December 30th, followed by colder temperatures favoring gas use in early January.

At 13:01 GMT, February natural gas futures are trading $2.369, down $0.131 or -5.26%.

Market Fluctuations and Weather Impact

Last week’s market saw a tussle between bulls and bears over January 2024 contracts, with bulls ultimately pushing a period close in the green. However, NatGasWeather’s report suggests a cautious approach due to an exceptionally warm December and reliance on colder weather in early January to drive demand.

EIA Reports and Rig Count Influence

The Energy Information Administration (EIA) reports a comfortable gas supply, with storage levels well within the five-year historical range. In contrast, Baker Hughes reports a reduction in U.S. oil and gas rigs, which, while potentially bullish, hasn’t significantly impacted the output poised to reach record highs in 2023 and 2024.

Short-Term Forecast: Bearish Yet Watchful

In the short term, the natural gas market appears bearish, influenced by current weather patterns and ample gas storage. However, the possibility of colder temperatures in early January and the evolving landscape of LNG exports necessitates a watchful approach. Market sentiment may shift with changing weather forecasts and increased LNG export capacities in the coming years.

Technical Analysis

The current market analysis for Natural Gas shows a bearish sentiment. The daily price of 2.478 is below both the 200-day and 50-day moving averages, at 3.239 and 3.037 respectively, indicating a downward trend. This positioning below the key moving averages typically suggests a lack of upward momentum.

Additionally, the price is lower than the minor resistance level at 2.590, reinforcing the bearish outlook. The absence of specified support levels suggests limited immediate floor for further declines.

Overall, Natural Gas’s current performance, positioned below critical moving averages and resistance levels, points towards a predominantly bearish market sentiment.