Natural Gas Prices Forecast: Rebounding Amid Weather Shifts

Key Points

• Gas prices recover despite warming weather patterns.
• U.S. gas production rebounds despite January dip.
• Bearish sentiment prevails in the natural gas market.

Natural Gas Futures Rebound Amid Weather Shifts

Natural gas futures are on the rebound, taking a pause from recent declines driven by a marked weather shift. These shifts, detailed by NatGasWeather, showcased warmer patterns from both the GFS and EC models. These unseasonal temperatures for late January and early February marked one of the warmest trends in decades.

At 13:30 GMT, U.S. Natural Gas futures are trading $2.078, up $0.024 or +1.17%.

Performance Overview

January witnessed gas production in the Lower 48 states average 103.6 billion cubic feet per day, a dip from December’s record 108.0 bcfd. However, daily U.S. gas output surged remarkably by 15.8 bcfd from January 17 to 29, peaking at 107.0 bcfd on Sunday.

Supply and Demand Dynamics

Notable natural gas price drops resulted from a substantial shift in weather forecasts. Both GFS and EC models predicted over 40 Heating Degree Days (HDDs) warmer, translating to minimal subfreezing high temperatures over the next 15 days across the U.S. This unusual occurrence for the season, highlighted by NatGasWeather, played a pivotal role.

Active Weather Pattern Ahead

NatGasWeather foresees an active weather pattern from January 30 to February 5, set to impact natural gas markets. This pattern is poised to bring rain and snow nationwide, affecting temperature trends regionally.

Despite a potential cold NatGasWeather predicts that national demand for natural gas will stay light over the next 7 days, offering valuable insights to stakeholders in the natural gas market.

Short-Term Outlook: Bearish

The market outlook leans bearish as we analyze the situation. The outage at the Freeport LNG export facility in Texas, coupled with milder weather conditions, is anticipated to suppress natural gas demand in the coming weeks.

Technical Analysis

Natural gas futures are slightly higher on Tuesday as traders assess the short-term weather forecasts. Give or take a few cold pockets in the United States, the overall forecast is bearish, which should keep a lid on prices.

Technically, the key level to monitor is the 50-day moving average at $2.111. This is controlling the intermediate-term direction. Overcoming it will put a bullish spin on the trade with the 200-day moving average at $2.520 the next likely target. A failure to hold the 50-day MA could trigger a steep break into the recent bottom at $1.774.