Natural Gas Prices Forecast: Futures Slide as Mild Weather Persists

By:James Hyerczyk  Published: Dec 4, 2023  fxempire.com

U.S. natural gas futures pressured by mild weather, low Asian LNG prices, and a bearish outlook due to high storage and warmth. 

Highlights

• Mild weather forecasts dampen U.S. natural gas futures.
• Asian LNG prices at 7-week low contribute to the bearish trend.
• High storage levels and warm weather affect market outlook.

U.S. Natural Gas Futures Dip Amid Mild Weather Forecasts

U.S. natural gas futures opened lower this Monday, influenced by unchanged weekend weather forecasts predicting light national demand for the next 15 days. The market is seemingly losing patience, awaiting colder weather patterns which could drive demand.

Asian Market Influence

Contributing to the downward trend, Asian spot liquefied natural gas (LNG) prices dropped to a 7-week low. Despite cold weather conditions, muted demand and easing global supply pressures, following recent maintenance and geopolitical tensions, have played a role. The average LNG price for January delivery in north-east Asia decreased by 6% to $15.7 per million British thermal units (mmBtu).

Demand and Supply Dynamics

Across Asia and Europe, demand continues to be weak. This subdued industrial and weather-related demand does not encourage a bullish outlook for the winter season. Northeast Asian end-users, despite low night temperatures, are not actively engaging in the spot market, relying more on term supply or previously secured spot cargoes.

Weather Outlook and Storage Levels

According to NatGasWeather, the U.S. will experience mild to slightly cool weather in the northern regions and dry, comfortable conditions in the south over the next week. This leads to expectations of light national demand. U.S. natural gas storage levels are about 7.2% above the norm for this time of year, with working gas storage at 3,836 Bcf, indicating sufficient supply.

Market Trend and Future Outlook

The natural gas contract saw a 3% decline last week, continuing a downward trend for the fourth consecutive week. With record production and high storage levels, the futures market indicates a reduced likelihood of price spikes this winter. Futures prices for the upcoming years show a rising premium, suggesting long-term market concerns. The weather is expected to remain warmer than normal until mid-December, further influencing the bearish market sentiment.

Examining the natural gas market, the current daily price at 2.733 is above the 200-day moving average at 2.622, suggesting a potential bullish trend in the long term. However, it is below the 50-day moving average at 3.070, indicating a short-term bearish trend.

The price is also above both the Minor Support at 2.690 and the Main Support at 2.590. Minor Resistance is at 2.838, and Main Resistance is at 3.002.

Considering these factors, the market sentiment appears mixed, with a short-term bearish outlook and a long-term potential for bullishness.