Natural Gas Prices Forecast: Lower Amid Weather Changes, European Price Drop

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Published: Jan 8, 2024, 12:49 GMT+00:00

U.S. natural gas futures and European gas prices fall, driven by strong supplies and weather trends, pointing to short-term price decline.

Key Points

U.S. natural gas futures drop over 3.5%
Europe’s gas prices decline with increased LNG supply
Bearish short-term forecast for natural gas market

U.S. and European Gas Markets React to Current Weather and Supply Conditions

U.S. natural gas futures are trading lower on Monday, dropping by over 3.5% earlier in the session. This decline, influenced by changes in weather conditions over the weekend and a slump in European demand, sees the futures trading at $2.807, down by 2.97%.

Impact of Weather and Supply

In the U.S., the decrease in natural gas prices is partially due to milder weather in the south and cooler yet stable conditions in the north. NatGasWeather highlights a lower-than-average withdrawal from supplies this winter, indicating moderate demand in the upcoming week.

European Market Trends

Similarly, in Europe, both Dutch and British gas prices are experiencing declines, driven by robust pipeline and liquefied natural gas (LNG) supplies. The recent arrival of three LNG cargoes in Britain, along with high storage levels, is helping to offset the heightened demand caused by colder temperatures.

Short-Term Market Forecast

The immediate forecast for the natural gas market leans bearish. Current supply conditions in both the U.S. and Europe, combined with the specific demand patterns linked to the weather, point to a continuing decline in prices. The near 85% capacity of Europe’s gas storage further reinforces this trend, suggesting ample supply availability to meet existing demands despite cooler weather.

Technical Analysis

Daily Natural Gas

The current positioning of Natural Gas Futures below both the pivot point at 2.838 and the 50-day moving average of 2.807 is a significant bearish indicator. This break below the pivot, which acts as a critical level for both support and resistance, suggests that the market is experiencing downward pressure. Typically, when a market falls below a key pivot point, it indicates a shift in sentiment among traders, with more sellers entering the market, expecting further declines.

Furthermore, the fact that the price has also dipped below the 50-day moving average reinforces this bearish outlook. The 50-day moving average is often used to gauge the intermediate trend, and prices falling below this level can signal a loss of upward momentum and a potential trend reversal.

Given these factors, traders might anticipate a continued downward trend in the short term. The next level of interest would be the main support at 2.690. If this level is breached, it could lead to an acceleration of the downward trend. Conversely, a rebound above the pivot point of 2.838 and the 50-day moving average might suggest a regaining of bullish momentum, although this seems less likely given the current market conditions.

About the Author

James Hyerczykauthor

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.