Natural Gas Prices Forecast: Europe’s Gas Glut Weighs Amid Warm Autumn

Highlights

• Warm forecast dampens U.S. gas demand.
• EIA sees 2023 natural gas highs.
• Europe’s gas surplus affecting future prices.

Natural Gas Futures Slip on Warm Forecast

U.S. natural gas futures are facing downward pressure for the third consecutive session. The market is reacting to a forecast of persistent warm weather, which dampens demand for heating fuel. December natural gas futures have seen a 1.02% decline, signaling a bearish mood among traders.

Weather Models and Demand Expectations

The latest weather models present a cooler trend, yet the overall outlook remains exceptionally bearish for the next 15 days due to dominant warm temperatures across most of the U.S. Natural gas prices have taken a hit, with milder weather patterns and record production levels contributing to the current slump.

EIA’s Production and Demand Projections

The Energy Information Administration (EIA) predicts that U.S. natural gas production and demand will reach new highs in 2023. The expected increase in production and a slight rise in consumption suggest an ample supply, which could temper bullish sentiment unless demand outstrips these projections.

European Gas Inventories and Price Dynamics

In Europe, record gas inventories are beginning to exert downward pressure on prices, with January 2024 delivery costs showing a notable decrease. Inventories are well above the seasonal average, owing to a mild autumn and strong futures prices that deter industrial usage and encourage LNG imports.

Short-Term Forecast

Natural gas is in a bearish position, influenced by warmer-than-expected weather and high production levels. While inventories are at record highs, the coming winter’s temperatures will play a critical role in shaping demand and price trajectories for natural gas futures.

Technical Analysis

The current daily price of natural gas at 3.101, having decreased slightly from the previous close, suggests a cooling off from recent upward momentum.

Although the price is still above the key 200-day and 50-day moving averages, the proximity to the minor support level of 3.002 could indicate potential vulnerability in the market.

The fact that the price has edged closer to this support, rather than ascending towards the minor resistance of 3.434, hints at an underlying bearish pressure. The price drop from the previous day hints at a growing bearish sentiment in the market.

While the longer-term trend remains above the moving averages, the immediate price action suggest that caution is warranted for a potential downward correction if the minor support level is breached.