Natural Gas News: Bearish Sentiment Grows Amid Oversupply, Mild Weather

U.S. Natural Gas Futures Decline as Warm Weather Pressures Demand

U.S. natural gas futures traded lower on Tuesday, extending Monday’s sharp losses, as elevated production and milder weather forecasts dampened demand expectations. Bearish traders remain focused on key technical support levels as fundamentals point to continued downside pressure.

At 13:29 GMT, Natural Gas futures are trading $3.191, down $0.023 or -0.72%.

Weak Heating Demand Weighs on Prices

Weekend weather models turned significantly warmer, further weakening the demand outlook. NatGasWeather reported a sharp reduction of 26 HDDs in the GFS model and 19 HDDs in the ECMWF model, aligning both toward warmer trends. For the December 16-22 period, high pressure is expected to dominate the southern and eastern U.S., driving temperatures into the 60s-70s across southern states and 40s-50s in the Northeast. While a brief cold spell could increase heating demand over the weekend, overall demand through Friday remains exceptionally low.

Production Remains Strong, Adding to Oversupply Concerns

Natural gas production continues to hover above 103 Bcf/d, exacerbating bearish sentiment. On Monday, Wood Mackenzie reported output at 103.8 Bcf/d, just slightly below Friday’s 104.7 Bcf/d but in line with the recent seven-day average. Without any significant disruptions to production, supply remains robust, limiting any upside momentum for prices.

Meanwhile, despite supportive news from the LNG export sector, including Plaquemines’ first liquefaction milestone, bullish catalysts have struggled to offset bearish fundamentals.

Technical Outlook Shows Key Support Levels in Play

From a technical perspective, natural gas futures are approaching critical support zones. The 50-day moving average at $3.086 and Fibonacci retracement support at $2.993 represent key levels for traders. A sustained move below these points could trigger additional selling pressure, with further declines toward $2.836 and the seasonal low of $2.588.

On the upside, the 200-day moving average at $3.369 remains a significant resistance point, followed by the $3.444-$3.647 retracement zone, where previous rallies have failed to gain traction.

Bearish Outlook with Focus on Weather and Production

Near-term forecasts indicate sustained mild weather and robust production, both of which limit natural gas price recovery. Unless colder trends emerge or production shows signs of easing, natural gas futures are likely to test lower support levels in the short term. Traders will closely monitor updates to weather models and production data for any potential shifts in market direction.

More Information in our Economic Calendar.