Natural Gas Price Fundamental Daily Forecast – Short-Term Outlook Bearish as Winter Delay Continues

Natural gas futures are edging lower early Tuesday, following yesterday’s minor reversal top. The chart pattern suggests two things:  firstly, traders are respecting the major technical resistance at $3.964, and secondly, worries over the threat of cold temperatures late in the month have been dampened.

At 09:53 GMT, March natural gas futures are trading $3.635, down $0.038 or -1.03%.

Monday Recap:  Prices Tumble on Mild Weather Forecasts

March natural gas futures fell over 3% on Monday on forecasts for milder than normal weather to continue through late December, keeping heating demand low for this year.

Surprisingly, that price drop came despite an 11% jump in European gas prices that should keep U.S. liquefied natural gas (LNG) exports near record highs.

European Gas Prices Soar to Highest Level Since Early October

On Monday, gas prices in Europe soared to their highest level since hitting a record in early October on rising demand expectations and renewed concerns that Russia will hold back gas exports to Europe over delays to the startup of Gasprom PAO’s Nord Stream 2 gas pipe from Russia to Germany.

U.S. Secretary of State Antony Blinken said on Sunday that gas is unlikely to flow through Nord Stream 2 if Russia renews its aggression against Ukraine.

Government Report Shows Longs have Bailed Out

The latest price decline comes after speculators last week cut their net long positions on the New York Mercantile and Intercontinental Exchanges for a second week in a row to their lowest since June 2020 on expectations the United States will have more than enough gas for the winter heating season.

Refinitiv Supply/Demand Numbers Mixed

Data provider Refinitiv said output in the U.S. Lower 48 state averaged 96.6 billion cubic feet per day (bcfd) so far in December, putting it on track to top the monthly record of 96.5 bcfd in November.

Refinitiv projected average U.S. gas demand, including exports, would jump from 110.3 bcfd this week to 123.7 bcfd next week as the weather turns seasonally colder.

Meanwhile, expensive prices in Europe and Asia continue to drive demand for U.S. Liquefied Natural Gas (LNG). Gas prices in Europe are around $38 per mmBtu. In Asia, they come in at $35. This compares with about $4 in the United States.

The amount of gas flowing to U.S. LNG export plants has averaged 12.0 bcfd so far in December now that the sixth train at Cheniere Energy Inc’s Sabine Pass plant in Louisiana is producing LNG. That compares to 11.4 bcfd in November and a monthly record of 11.5 bcfd in April.

Daily Forecast

The current price action suggests the longer-term picture is still bearish, but traders have to be prepared for periodic short-covering rallies. It’s still winter so there will be cold snaps throughout January and February. However, the cold weather delay has put a serious dent in previous bullish forecasts.

Looking ahead, the government report numbers indicate the milder-than-normal weather in December will cause U.S. utilities to leave enough gas in storage to allow stockpiles to reach above-normal levels in a week or two. That would be the first time storage would be at above-normal levels since April.

Technically, the main trend is down. A trade through $5.088 will change the main trend to up. This is highly unlikely. A move through $3.503 will signal a resumption of the downtrend with the next targets coming in at $3.430 and $3.186.

On the upside, minor resistance is $3.722. The main resistance is $3.964, while the major resistance is $4.378.