Natural Gas Prices Forecast: Weather Impacts and High Inventories Weigh

Highlights

• Natural gas futures show slight early decline.
• Global high inventories reduce demand.
• Bearish sentiment dominates market outlook.

Market Movements and Influences

Natural gas futures are experiencing a slight decline early Monday, continuing their hold within a one-week range. This pattern suggests a possible consolidation phase or a preparatory pause before further declines. Factors such as ample supply, high production, and mild weather are currently restraining market gains.

At 13:16 GMT, February natural gas futures are trading $2.371, up $0.005 or +0.21%.

Weather and Demand Dynamics

A key influencer is the weather, particularly on the East Coast, where a cold front might be driving short-covering and impacting market positions. Short-term forecasts indicate lighter national demand until late December, with a modest uptick as cooler weather sweeps the southern US.

Global Supply and Demand

Internationally, record temperatures in Europe and North America have prolonged the gas storage refill season, leading to high inventories. Natural gas demand is dampened by warmer weather, an industrial slowdown in Europe, and record U.S. production, alongside robust LNG exports.

Market Sentiment and Price Trends

The market sentiment is leaning bearish, influenced by the warmest autumn in the northern hemisphere in decades, high U.S. production levels, and full storage facilities. These factors have contributed to the current downturn in natural gas prices across the U.S., Europe, and Asia.

Short-Term Forecast

Given the high inventories, muted demand, and increased production, the short-term outlook for natural gas prices appears bearish. The recent drop in Europe’s natural gas prices and the subdued demand in the U.S. and Asia suggest a continuation of this trend, barring any significant changes in weather or supply disruptions.

Technical Analysis

The current daily price of natural gas at 2.504 is below both the 200-day and 50-day moving averages, set at 3.256 and 3.109 respectively. This positioning suggests a bearish trend, as the price is trading lower than these key averages.

Additionally, the price is below the minor resistance level of 2.590 and the main resistance at 2.690, indicating further bearish sentiment. The absence of specified support levels points to potential vulnerability to further downside risks.

Given these factors – the price’s position relative to the moving averages and resistance levels – the market sentiment for natural gas is currently bearish, suggesting caution among investors and the possibility of continued downward pressure on prices.