Stable U.S. gas prices face mild weather and strong supply
High inventories, mild winter impact natural gas demand
Bearish outlook with highest storage since 2020
Flat Trading Amid Support Base Efforts
U.S. natural gas prices are stable as traders attempt to build a support base, facing a mild winter, strong production, and ample supply. The recent bullish EIA report highlighted higher-than-expected storage declines, but exceptionally mild weather patterns continue to drive lower demand.
Weather and Storage Dynamics
Forecasts indicate above-normal temperatures reducing heating demand, impacting natural gas prices. The U.S. is experiencing milder weather, with most areas seeing temperatures above freezing during the holiday season. This weather pattern contributes to light national demand expectations for the next 15 days.
Inventory and Production Factors
High inventories, resulting from a mild 2022/23 winter and weak heating demand, are pressing down natural gas prices. U.S. inventories are significantly above the 5-year seasonal average. Additionally, rising U.S. natural gas production and a milder start to the heating season exert further downward pressure on prices.
Electricity Output and Price Trends
Increased U.S. electricity output suggests growing nat-gas demand from utilities. However, high storage levels and robust production are counterbalancing this demand. U.S. benchmark natural gas prices have declined from November highs, influenced by the high storage levels and milder weather.
Outlook for Winter Heating Season
The U.S. enters the winter heating season with the highest natural gas storage since 2020, indicating a surplus compared to the five-year average. This situation, along with the forecast of low demand in the coming week, sets a bearish short-term outlook for U.S. natural gas prices.
Daily Natural Gas
The current market sentiment for natural gas appears bearish based on technical indicators. The daily price of 2.574 is below both the 200-day moving average of 2.630 and the 50-day moving average of 3.055, indicating a negative trend in both medium and short-term perspectives. This positioning beneath key moving averages is a classic bearish signal.
Furthermore, the price is below the minor resistance level of 2.590, which could now act as a barrier to upward movement.
Overall, these factors combine to suggest a bearish outlook for natural gas in the current market scenario. Although it may be due for a technical bounce, which is likely to be another shorting opportunity for aggressive traders.
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.