Natural Gas Closes in on $4 in Minor Rebound
Natural gas futures are on the rise and are closing in on $4 MMBtu after a new set of weather forecasts predict cold weeks ahead.
Quick overview
- Natural gas futures in the U.S. rose to $3.96 MMBtu due to forecasts of colder weather.
- The increase follows a two-month low and is driven by utilities increasing demand as reserves deplete.
- The latest EIA report indicated a drop in natural gas supplies, aligning with expectations.
- Investors should anticipate sustained demand and potential price increases above $4 as winter progresses.
Natural gas futures in the U.S. climbed Tuesday, hitting $3.96 MMBtu after falling to $3.76. Cold weather forecasts are to be thanked for the climb, which may continue through late January.
Up from a two-month low, natural gas is now close to $4 in the United States as forecasts rolled in predicting a colder winter ahead. Utilities are piling on and pushing gas futures higher as a result as reserves are being used up at a decent rate.
The last EIA report showed that natural gas supplies dropped by 166 billion cubic feet, which is right on par with the expected levels. Buyers are defending the bullish trend and pushing the price to nearly $4, but rates are still well below their early December level of $5.20.
A Cold Winter ahead Means Higher Gas Futures
Multiple pullbacks were pushed back by the rising trendline of natural gas futures this week. Futures are expected to climb above that $4 benchmark soon and remain elevated as well.
Investors should expect increased demand through much of January as colder weather sets in and stays for a while. The occasional warm period is likely to be pushed back by strong cold fronts, and we should see gas reserves continue to drop and start to normalize after months of high inventory levels.
A break from the current trend could push gas prices back toward $3.55, similar to recent lows and on par with where the futures were at back in October. If the upward push continues, though, and forecasts continue to call for cold weather, then we could see the price push to $4.30 with perhaps a few spikes above that level before the futures consolidate.
Natural gas fell nearly 20% over the course of December, but we should not see a sharp decline on that level in January. Boyed by strong demand for indoor heating, decreasing reserves, and a colder than normal winter, natural gas futures are likely to soar in the coming weeks and remain elevated throughout the winter season.
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