Key Points

  • Natural gas futures slightly rise, weather forecasts bearish.
  • Mild temperatures lead to very light national gas demand.
  • Freeport LNG outage contributes to lower industrial gas demand.
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Current Market Trends

U.S. natural gas futures are experiencing a slight uptick, consolidating for the third consecutive session. Despite this, weather forecasts suggest a bearish outlook. NatGasWeather highlights the warmest pattern in the next 15 days of the past 50 years, potentially reducing heating demand.

Weather Impact on Demand

The U.S. is witnessing an active weather pattern with varying temperatures across regions. The northern U.S. is experiencing mild temperatures, while the southern U.S. remains warm. A cold shot is expected in the Northeast, but overall, national demand for natural gas is projected to be very light in the next seven days.

Price Trends and Supply Factors

Natural gas futures plunged to a nine-month low as the March contract became the front-month. This drop is attributed to milder weather forecasts and lower heating demand. Additionally, U.S. industrial demand for gas is depressed, partly due to the outage at Freeport LNG’s export plant in Texas. The recent Arctic freeze temporarily boosted demand but also disrupted U.S. gas output and LNG exports.

Supply and Demand Outlook

U.S. gas output in the Lower 48 states decreased in January but is on track to recover. Meteorologists expect warmer-than-normal temperatures through mid-February, which could keep demand subdued. Gas flows to major U.S. LNG export plants have also decreased, with a return to record levels not expected until the Freeport LNG plant resumes full operations.

Short-Term Market Forecast

In the short term, natural gas futures may remain under pressure due to the warm weather reducing heating demand and the recovering supply. The market will closely monitor temperature trends and the Freeport LNG plant’s status for any changes in supply and demand dynamics. The current bearish sentiment is likely to persist until there is a significant shift in either weather patterns or supply constraints.

Technical Analysis

Daily Natural Gas

Natural gas futures are edging higher on Wednesday, while straddling the downtrending 50-day moving average at $2.102 that appears to be controlling the near-term direction of the market.

Although a sustained move above $2.102 will indicate the presence of buyers, most traders don’t expect it to generate enough upside momentum to challenge the 200-day moving average at $2.518. This reasoning also supports the idea of selling rallies.

Conversely, a sustained move under $2.102 will signal renewed selling pressure with a steep break into the recent bottom at $1.774 likely.