US Natural Gas: Bears Tighten Grip Amid Warmer Weather Forecasts

Strong Production Limits Price Recovery

U.S. natural gas futures dropped sharply on Monday, opening with a downside gap as bearish fundamentals weighed on the market. Production remains elevated, with Wood Mackenzie estimating output at 103.8 Bcf/d on Monday. Although this is slightly below Friday’s 104.7 Bcf/d, it aligns with the recent seven-day average, highlighting ongoing oversupply concerns. With no major disruptions to output, traders remain cautious about the market’s upside potential.

At 14:51 GMT, Natural Gas futures are trading $3.20, down $0.080 or -2.44%.

Warmer Weather Forecasts Sap Heating Demand

Weekend weather updates exacerbated bearish sentiment as warmer trends emerged across key forecast models. According to NatGasWeather, the GFS model trended 26 HDDs warmer, signaling a sharp reduction in near-term heating demand. Initially, the ECMWF model leaned colder, but its overnight update reversed significantly, shedding 19 HDDs and aligning more closely with the GFS outlook. This reinforced expectations for weak demand in the coming days.

For the period December 16-22, high pressure is set to dominate the southern and eastern U.S., with mild highs in the 60s-70s across much of the southern states and 40s-50s in the Northeast. While light-to-cool systems will push into the Northwest and Rockies, demand through Friday remains exceptionally low. A brief surge in heating demand may occur over the weekend as colder air tracks across the Great Lakes and East, bringing highs in the 20s-30s and lows in the 10s-20s.

Key Technical Levels Under Pressure

Technically, natural gas futures are approaching critical support zones. The 50-day moving average at $3.090 and Fibonacci support at $2.993 are key levels traders are monitoring. A decisive break below these points could trigger further declines toward $2.836 and potentially the seasonal low of $2.588.

On the upside, resistance remains formidable. The 200-day moving average at $3.372 presents the first barrier, with additional resistance seen in the $3.444-$3.647 zone, where prices have struggled to sustain rallies.

Short-Term Outlook: Bears Maintain Control

With warmer weather forecasts reducing near-term heating demand and production levels staying elevated, natural gas futures face sustained downside pressure. According to NatGasWeather, unless colder trends reappear or production eases, prices are likely to test lower support levels in the short term. Traders should watch weather model updates and production trends for potential shifts in market direction.

More Information in our Economic Calendar.