Natural Gas Pressured by Forecasts Calling for Less Cold

Natural gas futures plunged nearly 7% on Friday despite a period of record volatility on forecasts calling for less cold and lower heating demand over the next two weeks than previously estimated.

The market has been hit hard since Wednesday even as a massive storm battered much of the country from Texas to York, cutting gas output to its lowest level since 2021’s February freeze.

On Friday, March Natural Gas futures settled at $4.572, down $0.316 or -$6.46%.

Comparison to Last Year’s Freeze in Texas, but Different Results

Last February, Winter Storm Uri killed over 200 people in Texas, caused power and gas prices to soar to record highs in many parts of the country and left millions of homes and businesses without heat and power for days after gas prices and power plants froze.

This week’s storm, called Winter Storm Landon, was much less severe than Uri. High temperatures during Uri remained below freezing for eight days in a row in the West Texas town of Midland in the Permian oil – and gas-producing shale basin, according to Accuweather.

Recent Trade Highlighted by Extreme Volatility

Friday’s nearly 7% decline was actually mild for the front-month futures contract after a couple of extremely volatile weeks when the contract soared by a record 46% on January 27, plunged 26% on January 28, jumped 16% on February 2 and fell 11% on February 3. Those large prices changes over the past couple of weeks boosted close-to-close volatility over the past 30 days to a record high on both Thursday and Friday, above the prior volatility high set in 1996.

Short-Term Weather Outlook

According to Natural Gas Intelligence (NGI), “With temperatures expected to rise considerably from the recent sub-freezing levels, traders have kept a watchful eye on whether the Arctic conditions could quickly return. Weather models in recent runs had backed off the intensity of a looming mid-month cold snap, with the overnight models shedding several heating degree days from the 15-day outlook.”

Short-Term Technical Analysis

The main trend is up according to the daily swing chart, however, momentum is trending lower. A trade through $5.572 will signal a resumption of the uptrend. A trade through $3.629 will change the main trend to down.

The minor trend is down according to the daily swing chart. This is controlling the momentum.

The short-term range is $3.629 to $5.572. The market is currently trading on the weak side of its 50% level at $4.601, making it resistance.

On the upside, the resistance is $4.774 to $5.094, followed by $5.572 and $6.132. On the downside, the support is $4.378 to $3.964, followed by $3.629, $3.416 and $3.186.