Natural Gas Prices Forecast: Futures Tumble Amid Mild Weather Forecast

Highlights

• Futures fall with warmer weather outlook
• EIA data hiatus increases market volatility
• Contango suggests strategic storage plays

Natural Gas Futures Slide Amid Warmer Weather Outlook

U.S. natural gas futures continue their descent, marking a significant downturn for the second consecutive session on Tuesday. The December contract is notably lower, trading at $3.165, a decline of over 3% by midday GMT, as the market reacts to forecasts of warmer weather that could dampen heating fuel demand.

Weather Trends Cool Market Heat

The bearish sentiment in the natural gas market is largely influenced by weather forecasts predicting warmer temperatures across major parts of the U.S. into mid-November. This expected mild weather reduces the immediate need for heating, overshadowing today’s minor price recovery and reinforcing the market’s downward trajectory.

EIA Data Delay Adds to Volatility

Market volatility is heightened by the Energy Information Administration’s (EIA) hiatus in storage data reporting due to system updates. This interruption shifts focus to weather predictions to anticipate demand changes, contributing to the prevailing uncertainty in the natural gas market.

Contango Condition Persists

The futures market remains in a state of contango, with later contracts priced higher than nearer ones, indicating a strategy among traders to store now and sell later. Nonetheless, spot prices at the Henry Hub benchmark linger below futures levels, confirming a continuing bearish market view despite today’s trading activities.

Outlook Amidst Production Highs

Despite a record production report from LSEG and the potential for increased demand as colder weather eventually sets in, the market is leaning towards a bearish outlook. The likelihood of sustained warm weather through November is applying downward pressure, suggesting further declines could be in store for natural gas futures in the short term.

Technical Analysis

Natural gas is currently trading at $3.167, sitting just below minor resistance at $3.184 and above minor support at $3.002. This positioning suggests a tentative market, with the potential for both upside and downside movements.

The commodity is approaching the 50-day moving average of $2.976. It’s also significantly above the 200-day moving average of $2.593, underscoring a longer-term bullish sentiment.

However, the proximity to the minor resistance may cap immediate gains, and the recent drop from the previous close signals a short-term loss in momentum.

The market’s sentiment appears mixed; while the averages indicate a bullish undertone, current trading near resistance and a pullback from recent highs could hint at a bearish shift, especially if the price fails to hold above the nearest support levels.