Natural Gas Forecast: Colder Weather Outlook Boosts Heating Demand

Highlights

• Natural gas futures surge on colder weather outlook
• Colder trends expected to boost heating demand
• Record-high LNG feed gas demand supports natural gas

Overview

Natural gas futures saw a surge in early trading on Monday due to a more robust late-season heating demand outlook, which was driven by colder weather model trends observed over the weekend.

At 13:17 GMT, Natural Gas is trading at $2.2370, up $0.1750 or +8.49%.

Natural Gas Futures Jump on Colder Weather

On Monday, natural gas futures surged due to the expectation of stronger late-season heating demand, resulting from colder weather model trends seen over the weekend.

According to NatGasWeather, the colder trends were observed for days eight through 15 of the outlook period, with the European model projecting a 13 heating degree day (HDD) increase.

These trends are expected to focus on a weather system moving into the central Lower 48 and tracking across the Great Lakes and Northeast between this coming Sunday and April 26.

While lows are not expected to drop below the 20s and 30s, the added demand could push prices higher after the weekend break.

According to the most recent forecasts, the southern United States will experience light cooling demand, while the northern U.S. will have moderate late-season HDD, with numerous HDDs colder over the next 15 days than what was observed on Friday.

These observations suggest that there have been significant HDD gains in recent weeks, which may alter the April weather sentiment outlook.

Potential Recovery on Rising Heating, Record-High LNG Feed Gas Demand

Physical Henry Hub prices came under pressure last week due to mild weather-driven demand, dropping as low as $1.840 on Friday, but spot prices could soon recover, according to analysts.

Daily heating demand is more than double last week’s lows for the rest of the month, which may support natural gas.

Additionally, LNG feed gas demand is setting record highs, including an estimated 14.9 Bcf/d on Sunday, almost 2.2 Bcf/d higher than the January-March average, according to EBW estimates.

Natural gas production readings are soft, and the storage surplus may increase in the coming weeks.

Technical Analysis

From a technical view, according to the daily chart, Natural Gas is trading below the pivot at $2.3533, while the RSI indicator is close to turning up. The technicals appear to be in favor of an upside and a potential test of that $2.7267 price. If the price does not reach its peak and instead has a downward trend, we may witness a decline toward the $1.6947 region.

Resistance and Support Lines:

Short-Term Outlook

The short-term forecast for natural gas futures is bullish due to the expectation of stronger late-season heating demand and colder weather model trends, which drove the surge in prices.

The potential recovery on rising heating demand and record-high LNG feed gas demand also supports a bullish outlook for natural gas futures.

However, the soft natural gas production readings and a possible increase in storage surplus may weigh on prices in the long term.

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