Natural Gas Prices Forecast: Weather Forecasts, EIA Data Drive Energy Futures

Highlights

• Natural gas futures rise 2.2% ahead of EIA report
• Mild winter leads to lower-than-expected gas withdrawals
• Weather forecasts suggest fluctuating gas demand

Natural Gas Futures Respond to EIA Data Amid Mild Weather Conditions

The natural gas market is exhibiting a notable response as traders anticipate the upcoming Energy Information Administration (EIA) storage report, due to be released at 15:30 GMT.  According to a Wall Street Journal survey, the forecasted increase in February’s natural gas futures by 2.2% to $2.490/mmBtu is primarily driven by the expected below-average draw of 78 billion cubic feet (Bcf), which would adjust total stockpiles to 3,499 Bcf.

Impact of Unseasonably Warm Winter on Gas Demand

This winter’s milder temperatures have led to smaller draws than usual, as evidenced by a Reuters poll indicating a predicted withdrawal of 79 Bcf from storage, much lower than the 195 Bcf seen in the same period last year and the five-year average decrease of 123 Bcf.

Storage Levels and Heating Degree Days Analysis

During the week concluding on December 15, utility companies withdrew 87 Bcf of gas from storage, per U.S. Energy Information Administration data. The expected stockpile level for the week ending December 22 is projected at 3.498 trillion cubic feet (Tcf), around 11.3% above the same week last year and 10.2% higher than the five-year average. Moreover, the heating degree days (HDDs) count last week was 142, lower than the 30-year norm of 179 HDDs, indicating reduced heating requirements, according to NatGasWeather.

Weather Forecast and Its Influence on Natural Gas Usage

Weather forecasts from NatGasWeather for December 28 to January 3 show a blend of rain and snow in the eastern U.S., with milder temperatures leading to lower national demand in the coming days. However, colder conditions expected in the Midwest and Northeast next week could potentially heighten gas demand.

Short-Term Market Outlook

The current market outlook for natural gas futures is cautiously optimistic, balancing the impacts of the mild weather against potential demand increases due to colder forecasts. With the EIA data and weather predictions playing pivotal roles, traders are maintaining a watchful eye on the evolving market scenario.

Technical Analysis

The current daily price of natural gas at 2.529 is below both the 200-day and 50-day moving averages, at 3.097 and 2.872 respectively, indicating a bearish trend. This positioning suggests that the market has been experiencing a longer-term downtrend, as evidenced by the price trading below these key averages.

The minor support and resistance level, both at 2.590, now acts as a pivotal point. Since the current price is below this level, it’s likely to act as resistance. However, it could be the trigger point for an acceleration to the upside if there is enough buying power in this thin holiday trade. A surprise in the government’s storage report could be the catalyst that fuels the upside breakout.

The main resistance at 2.690, above the current price, further emphasizes the bearish sentiment. The recent uptick from the previous close of 2.437 to 2.529, while positive, doesn’t substantially change the bearish outlook given the significant gap from the moving averages and resistance levels.