Natural Gas Prices Forecast: Mild Weather, High Output Pressuring Futures

Highlights

• US gas futures near September lows
• Mild weather reduces heating demand
• Bearish sentiment amid high output

US Natural Gas Futures Test Two-Month Low Amid Mild Weather

US natural gas futures are weaker on Tuesday, with the December contract on the New York Mercantile Exchange nearing its lowest point since late September. This decline is attributed to record-high output levels coupled with mild weather conditions that have dampened heating demand.

Weather Impact and Market Volatility

Current weather patterns, as noted by NatGasWeather, show strong national demand due to chilly temperatures across the US, which is expected to shift towards milder conditions. This shift is anticipated to result in lighter than normal demand late this week and into the next. The December contract’s expiration on Tuesday also introduces potential volatility, typically heightened by low trading volumes around contract expiry.

Market Sentiment and Output Increases

Robert DiDona of Energy Ventures Analysis points to recent supply gains and moderated temperatures as factors contributing to bearish market sentiment. However, he also acknowledges the potential for price volatility depending on early winter heating trends. LSEG data indicates a rise in average gas output in the Lower 48 US states, with a forecasted decline in gas demand including exports.

Short-Term Forecast and Trading Strategies

Analysts suggest a possible downward trend for the market, advising a cautious approach to bullish positions. Ritterbusch and Associates, an energy advisory firm, recommends deferring bullish stances and considering re-entry into long positions on further declines. Additionally, gas flows to major US LNG export plants have shown an increase, reflecting the dynamic supply and demand landscape in the natural gas market.

Overall, sentiment is bearish and not likely to change in a major way until lingering cold weather arrives.

Technical Analysis

In the natural gas market, the current daily price at 2.953 hovers just below the minor resistance level of 2.954, indicating a critical juncture for potential price movements.

It lies above the 200-day moving average of 2.616 but below the 50-day moving average of 3.066. This positioning between the two averages suggests a neutral to slightly bullish short-term trend, as it’s above the longer-term average yet below the shorter-term one.

The absence of a main support level and the proximity to minor resistance suggest that the current price level is pivotal. If the price breaches the minor resistance, it could signal a shift towards a more bullish sentiment. Conversely, failure to break through might result in a reversion towards the 200-day moving average, indicating a bearish outlook.

Overall, market sentiment appears cautiously optimistic, with a focus on the impending interaction with the moving averages.

Keep in mind that the market rolled over into the January futures contract, which led to the appearance of a gap higher opening. It may take a few days for traders to adjust to the front-month futures contract and price levels.