Natural Gas News: Futures Retreat as Traders Await Key Storage Report and Weather Update

Natural Gas Futures Dip Despite Early Gains

U.S. natural gas futures are trending lower on Thursday, reversing earlier strength. Following the Christmas holiday, trading opened with initial losses, driving prices down to $3.770 before rebounding to a new yearly high at $4.010. However, heavy selling pressure quickly erased those gains, pushing futures back down to $3.800.

At 13:33 GMT, Natural Gas futures are trading $3.828, down $0.118 or -2.99%.

Volatility Driven by Weather Patterns

The price action suggests a volatile period ahead, with market participants closely monitoring changing weather forecasts. A cold weather system remains entrenched across the Midwest, Ohio Valley, and Northeast through Monday, keeping temperatures in the 20s and lows in the teens. This is expected to sustain regional demand in the near term.

For the remainder of the country, conditions are warmer, with highs reaching the 50s to 70s. Forecasts indicate a shift to milder conditions nationwide later this week, which could weigh on prices. By the weekend, demand is projected to fall significantly as warmer-than-normal temperatures settle across most of the U.S.

Cold Start to January Sparks Price Optimism

Despite short-term price softness, futures opened the week higher, buoyed by prospects of a colder-than-normal pattern from January 2-6. Market participants are banking on a significant shift in temperatures at the start of the new year to justify the recent price rally. This optimism is tempered by the risk of weather models softening, which could trigger profit-taking and dampen bullish momentum.

Storage Draw in Focus

The U.S. Energy Information Administration (EIA) delayed its weekly natural gas storage report to Friday due to the holiday. As of December 13, working gas in storage stood at 3,622 Bcf, reflecting a 125 Bcf draw from the prior week. This leaves inventories 20 Bcf higher year-over-year and 132 Bcf above the five-year average. Traders anticipate a draw between 98 and 101 Bcf for the week ending December 20, reinforcing steady demand but not enough to significantly shift market sentiment.

Market Forecast

Near-term, natural gas futures may experience further downside if weather models confirm sustained warmth into January. However, continued cold forecasts for early January could provide the necessary support for prices to retest the $4.010 resistance level. A break above this could push futures higher, with $4.300 a potential target, while failure to hold above $3.770 may expose markets to further selling pressure.

More Information in our Economic Calendar.