Natural Gas Prices Forecast: Bearish but Shorts Eyeing Potential Demand Shift

Highlights

• Natural gas futures drop on milder weather forecast.
• Bearish short-term outlook with weather as key factor.
• Any significant changes in weather patterns could fuel short-covering rally.
• NatGasWeather suggests possible colder weather by late December or early January.

U.S. Natural Gas Futures: A Shift in Market Sentiment?

Market Trends in Response to Weather Shifts U.S. natural gas futures have seen a slight downturn on Friday, relinquishing earlier gains, yet the early rally has marked the second consecutive session of higher-highs and higher-lows since November 14.

As of 12:14 GMT, February futures stand at $2.336, a decrease of $0.011 or -0.47%, reflecting traders’ reactions to the less cold weather forecast and prompting some short sellers to adjust their positions.

Upcoming Shift in Demand

The weather plays a crucial role in natural gas demand, with forecasts predicting much lighter demand than usual in the upcoming 13 days. NatGasWeather highlights a potential shift towards colder weather towards the end of December or early January. The forecast for December 15-21 across the U.S. indicates mild temperatures, leading to lower-than-average demand.

Recap of Thursday’s Market Behavior

Thursday’s market showed stability in U.S. natural gas futures, balanced by rising output and increased demand forecasts. The EIA reported a withdrawal of 55 billion cubic feet (bcf) of gas from storage, aligning closely with analysts’ predictions. Despite slight price gains, record production levels and sufficient storage indicate bearish trends for the winter futures market.

Analysts’ Perspectives and Future Outlook

Market analysts foresee a potential increase in storage surplus by the month’s end due to mild temperatures. LSEG’s data shows a rise in U.S. gas demand and output. However, analysts like Thomas Saal of StoneX Financial suggest the market might remain sluggish unless colder weather conditions emerge.

Short-Term Forecast: Bearish Tendencies

Given the current market conditions, including mild weather forecasts, ample gas in storage, and steady production levels, the short-term outlook for U.S. natural gas futures appears bearish. Any significant changes in weather patterns could, however, alter this trajectory. Late December/early January could see the return of cold temperatures.

Technical Analysis

The current daily price of Natural Gas Futures at 2.395 is trading below both the 200-day (3.277) and 50-day (3.184) moving averages, indicating a bearish sentiment in the market. This positioning suggests a lack of upward momentum, as the price remains beneath key long-term and medium-term indicators.

Additionally, the price is below the minor resistance level of 2.590 and the main resistance level of 2.690. The absence of noted support levels and trend line data limits the analysis, but the current price’s position relative to the moving averages and resistance levels leans towards a bearish outlook for Natural Gas Futures in the short term.