Natural Gas Prices Forecast: Rally Fueled by Weather-Driven Demand Surge

Highlights

• Natural Gas Hits Highest Level Since Early December
• Increased Demand, Exports Fueling Natural Gas Rally
• Bullish Tone Despite High Storage, Mild Weather

Natural Gas Surges Amid High Demand and LNG Exports

The natural gas market is riding a bullish wave, hitting its highest point since December 8, thanks to a four-day rally. This upward movement echoes a bullish reversal pattern that emerged on December 13, hinting at more gains ahead, potentially reaching around $2.796 in the near term.

Demand and LNG Exports Fuel Rally

February natural gas is trading at $2.490, showing a substantial gain of $0.065 or 2.68%. Traders are buoyed by projections of increased demand next week and record-high gas flows to LNG export plants. This rise is noteworthy, even against a backdrop of record gas production and forecasts of mild weather, which usually reduce heating demand.

Storage Levels and Market Outlook

Despite robust storage levels, 8.7% above typical figures for this season, the market is leaning towards a positive weekly close after a six-week downturn. This rebound aligns with growing investor interest, as reflected in surging NYMEX futures and record holdings in the U.S. Natural Gas Fund (UNG).

Supply Trends and Output Predictions

Gas output in the Lower 48 U.S. states has marginally increased, as per LSEG data. Although meteorologists anticipate warmer weather until late December, LSEG forecasts a rise in U.S. gas demand, including exports, before a seasonal dip in the final week of the year.

Rig Counts and Future Production

A recent decrease in operating oil and gas rigs, as reported by Baker Hughes and Enverus, points to a potential future decline in output. This decrease in rigs, an early indicator of production, is the first in five weeks, suggesting a cautious approach by energy firms.

In summary, the current bullish trend in natural gas prices, driven by strong demand and LNG export flows, looks set to continue in the short term, despite factors like high storage levels and mild weather conditions.

Technical Analysis