Natural Gas Prices Forecast: Weather Forecasts Driving Volatility

Key Points

• Natural gas futures decline despite bullish storage report.
• Weather forecasts crucial for mid-January natural gas demand.
• EIA report shows modest storage draw, impacting market balance.

Fluctuations in Natural Gas Futures

Natural gas futures are experiencing a pullback on Friday after significant gains, despite a smaller-than-expected storage draw of 14 billion cubic feet in the EIA’s weekly storage report. The market’s sensitivity to bullish news, despite impending surpluses, signals a complex trading environment influenced by weather forecasts and storage levels.

Weather Forecasts and Demand Expectations

Mid-January weather predictions, indicating colder conditions and potential winter storms across the US, could boost natural gas demand. These forecasts, including snow in the Northeast and a more impactful system next week, are pivotal in shaping market expectations.

EIA Data and Storage Concerns

The Energy Information Administration’s (EIA) latest report showed a modest draw from storage during the week-ending December 29, highlighting a slower start to the winter demand season. With current withdrawals significantly below the five-year average, market focus intensifies on the balance between supply and consumption.

Short-Term Forecast: A Cautious Outlook

Given the current market conditions, including fluctuating weather patterns and storage data, the short-term outlook for natural gas remains bearish. The market appears responsive to bullish signals but wary of underlying supply surpluses. The current rally is likely being fueled by short-covering. Despite the move, no change in trend has taken place and professional appear eager to reinitiate short positions.

In conclusion, natural gas markets are navigating a period of uncertainty, with weather forecasts and storage data playing critical roles in shaping market sentiment. The upcoming weeks will be crucial in determining the direction of natural gas prices amidst these fluctuating factors.

Technical Analysis

In the natural gas market, the current price at 2.702 reflects a bearish sentiment, as it resides below the crucial 50-day moving average of 2.813 and the 200-day moving average of 3.078. This placement suggests a downward trend.

The recent rally was halted by a confluence of resistance at 2.838 and the 50-day moving average, indicating strong overhead barriers to upward movement. The market is now hovering just above the minor support level at 2.690, with a more significant support level at 2.590 lying beneath.

The proximity to this minor support level suggests potential vulnerability to further declines if this level is breached.