Natural Gas Prices Forecast: Lower as Mild Winter Expectations Weigh

Highlights

• Warm forecasts drive natural gas prices down.
• High storage levels add to downward price pressure.
• Robust US gas production offsets market decline.

Futures Dip Amid Seasonal Temperatures and Storage Surplus

US natural gas futures are trending lower, influenced by forecasts of seasonal temperatures and concerns over demand. The latest weather data, particularly from the ECMWF model, shows a warmer trend than previously anticipated, leading to a decrease in expected heating demand days (HDDs). This adjustment in weather forecasts has contributed to the current decline in natural gas prices.

Weather and Storage Impacting Demand

NatGasWeather’s latest short-term outlook indicates a mix of weather systems across the US, with moderate demand expected until the weekend, when colder temperatures will likely increase demand. However, the overall milder winter predictions and high storage levels are exerting downward pressure on prices. US natural gas stockpiles were already about 6% above normal as of mid-November and are expected to further increase.

Market Sentiment and Technical Analysis

The natural gas market is also reacting to the possibility of a warmer-than-average winter, potentially reducing heating demand. This, coupled with the approaching Thanksgiving holiday, traditionally a period of slower demand, is contributing to the negative market sentiment. Additionally, technical factors are encouraging speculators to consider short positions, with a downside potential to the $2.75 area.

Production and LNG Exports

Despite the current market trends, US gas production has been robust, with an average output increase in the Lower 48 states. Gas flows to major US LNG export plants have also risen, reflecting strong production and export capabilities, which could play a role in balancing the key market factors.

Technical Analysis

Natural gas futures, currently at 2.882, are trading above the 200-day moving average of 2.609 but below the 50-day moving average of 3.052. This positioning suggests a neutral to slightly bearish trend, as the price is caught between these key averages.

The close proximity to the minor support level at 2.838 indicates a testing point; holding above this level could prevent a further decline. Conversely, the minor resistance at 3.002 presents a near-term challenge for upward momentum.

The market sentiment for natural gas futures is cautiously bearish, with potential for reversal if it can break above the 50-day moving average and minor resistance levels.