Natural Gas News: Prices Weaken Amid Overnight Weather Shift

U.S. Natural Gas Market Trends and Short-term Forecast

U.S. natural gas futures are lower on Tuesday after an initial rise, hinting at potential market stabilization. However, continued buyer momentum is needed to surpass the downtrending 50-day moving average that has influenced market directions since early November. This adjustment follows fluctuations in demand influenced by weather conditions and operational changes.

At 13:17 GMT, Natural Gas Futures are trading $1.748, down $0.043 or – 2.40%.

Recent Market Movements

Natural gas prices initially climbed due to the restart of Freeport LNG operations and increased demand driven by cooler weather. However, gains were short-lived as the market dipped on forecasts of milder weather. Notably, weather systems are expected to bring cooler temperatures across the Great Lakes and Northeast, potentially boosting demand temporarily.

Consumption Records and Trends

In 2023, the U.S. set both annual and monthly records for natural gas consumption, with an average daily use reaching 89.1 billion cubic feet. This spike is largely attributed to increased usage in the electric power sector, coinciding with a decline in coal-fired capacity. Notably, the electric power sector saw a significant rise in consumption during the summer months, despite overall flat growth in electricity demand.

Market Influences and Outlook

The U.S. is experiencing a transitional energy phase, marked by the retirement of coal production units and a shift towards natural gas and renewable energy sources. Despite a 6% increase in natural gas-fired power generation in mid-2023, overall electricity growth remained minimal. Additionally, warmer-than-average temperatures led to reduced natural gas consumption in residential and commercial sectors, indicating a potential easing of demand pressures.

Short-Term Forecast

In the short term, the natural gas market is likely to experience restrained growth, influenced by weather-driven demand fluctuations and structural shifts in energy consumption. While immediate prospects seem limited, the long-term outlook remains bullish with anticipated production cuts fostering stronger market conditions. Investors should prepare for volatile but potentially upward-trending market behavior in the coming months.

Technical Analysis

Natural gas futures are lower but remain in consolidation mode as traders work through the short-term bearish outlook and the longer-term bullish potential.

While the recent price action strongly suggests support around the $1.696, the resistance is clearly the 50-day moving average at $1.876.

Look for sellers to re-emerge on the first test of the 50-day MA. However, be prepared for a volatile move to the upside if it is overtaken. We could see an acceleration to the upside, driven by a combination of short-covering and aggressive speculative buyers.