Natural Gas Prices Forecast: Warm Weather Trends Fuel Bearish Outlook

Highlights

• Lower demand and mild weather drive natural gas prices down.
• Gas storage levels 7.8% higher, contributing to price drop.
• Future outlook bearish unless cold weather patterns emerge.

Feeding the Bear…

U.S. natural gas futures are trading lower on Monday, reflecting an established bear market trend. The weekly chart’s gap-lower opening and forecasts for milder weather have contributed to a decrease in heating demand expectations through late December.

Market Trends and Storage Levels

The market is experiencing a downturn due to a combination of mild weather forecasts and record natural gas output. This scenario is likely to result in lower-than-usual withdrawals from gas storage. Currently, gas storage levels are about 7.8% higher than average for this time of year, further pressuring prices.

Price Trends and Weather Forecasts

Natural gas prices have shown bearish signals for weeks, with indications that prices for the winter season likely peaked in November. NatGasWeather.com reports that the U.S. will experience light to very light national demand for natural gas over the next 15 days due to warmer-than-normal temperatures across the country.

Short-term Forecast and Market Sentiment

With the expectation of continued mild weather patterns and strong production levels, the forecast for natural gas futures remains bearish. The absence of significant cold weather patterns through the end of December, coupled with high storage levels, suggests that natural gas prices may continue to face downward pressure in the short term.

Impact on Storage and Future Outlook

Recent weather patterns and forecasts indicate that upcoming weekly storage reports are likely to show lighter-than-normal draws. If colder weather patterns do not materialize in early January, surpluses are expected to increase, maintaining bearish pressure on natural gas prices. The market will need colder weather patterns to shift this trend.

Technical Analysis

The current market sentiment for natural gas appears bearish. The daily price of natural gas, at 2.391, is significantly below both the 200-day and 50-day moving averages, which are 3.308 and 3.266 respectively. This positioning below key moving averages typically indicates a bearish trend.

Additionally, the current price is well below the identified minor resistance level at 2.590 and the main resistance at 2.690, reinforcing the bearish outlook. Without significant support levels identified, there’s an increased likelihood of further downside potential.

Overall, the technical indicators suggest that the natural gas market is currently in a downtrend with a bearish sentiment prevailing.