Natural Gas Prices Forecast: Wavering as Weather Trends Clash with LNG Exports

Highlights

• Natural gas futures dip, ending brief rally
• Mild weather and robust LNG exports impact demand
• Geopolitical tensions stir LNG market uncertainty

Natural Gas Futures Dip Amid Market Trends and Weather Forecasts

Natural gas futures are trading lower this Tuesday, marking an end to a short-lived rally. The drop aligns with a broader downtrend in the market, driven by factors like high production, ample supply, mild weather conditions, and low demand.

Weather Influence and LNG Flows

The current weather forecast indicates much lighter national demand for natural gas through December 28, with a slight uptick expected from December 29 to January 2. However, Heating Degree Days (HDDs) remain below normal, signaling continued light demand. Meanwhile, liquefied natural gas (LNG) exports remain robust, with gas flows to major U.S. LNG export plants averaging 14.7 billion cubic feet per day (bcfd) in December.

Geopolitical Tensions and LNG Market

Geopolitical tensions, particularly the recent attacks on shipping routes in the Red Sea, are causing some disruptions. These attacks have led major companies like BP to reroute or pause shipments through the Red Sea, a crucial transit point for natural gas. Despite these challenges, analysts from Goldman Sachs believe disruptions in the Suez Canal will have limited impact on LNG markets.

Market Outlook and Short-Term Forecast

Short-term prospects for natural gas markets are presenting a mixed picture. On one hand, robust LNG exports, as evidenced by high gas flows to major U.S. LNG export plants, are signaling bullish possibilities.

On the other hand, this positive sentiment is being offset by current mild weather leading to lower demand. Additionally, geopolitical tensions, particularly in the Red Sea, are adding a variable to market predictions.

While these maritime disruptions are not anticipated to drastically affect global LNG supply, they contribute to market unpredictability.

In summary, the immediate forecast for natural gas futures is a balancing act between these opposing factors, with market participants keenly watching for indications that will determine the market’s direction.

Technical Analysis

The current daily price of natural gas at $2.462 is significantly below both the 200-day and 50-day moving averages, which are $3.263 and $3.135 respectively. This indicates a bearish trend, as the price stands at approximately 75.5% of the 200-day moving average and 78.5% of the 50-day average.

Furthermore, the current price is below the identified minor resistance level of $2.590 and well below the main resistance of $2.690.

This positioning below key resistance levels without clear support levels suggests that the market sentiment for natural gas is currently bearish, with potential for further downward movement unless a significant market change occurs.