Natural Gas Futures Remain Low as Forecast Calls for Warm Winter
Quick overview
- Natural gas futures in the U.S. fell below $4 after a significant drop, marking the largest decline since 1995.
- Warm weather forecasts are contributing to a selloff, despite high demand and recovering production levels.
- Gas futures are currently at $3.348/MMBtu, with a slight recovery observed on Tuesday, indicating potential stabilization in the market.
- While LNG exports are decreasing, they are still supporting the market, suggesting that gas futures could rise as demand remains strong.
On Tuesday, natural gas futures in the United States remained below $4 after a sharp drop on Monday that marked the biggest decline since 1995 for the market.
The price of natural gas is now below the 200-day moving average as well as the 50-day average. Warm weather forecasts are bringing prices down and creating a massive selloff this week.
The 10-15 day forecasts determine what price gas futures are trading for, which means that next week’s outlook directly determines today’s prices. Even though temperatures are still low and demand is relatively high for natural gas, the market is looking ahead to next week’s warmer temperatures.
Gas Futures Not Going to Remain Bearish
Now down to $3.348/MMBtu, gas futures are dropping even as production picks back up. After nearly a week of frozen roads and heavy snow, gas production across the United States recovered, reaching 111.6 bcf/day.
The market is moving in a downward trend that is expected to stabilize soon. That is because LNG exports are up, ensuring that the excessive supplies are being used and demand is being found outside the United States even as the country warms. Even though gas futures remain below the lengthy moving averages, the bearish trend should slow down soon, and the market should level off.
Multiple headwinds are keeping prices low, and they dropped around 27% on Monday. But we are seeing indications of recovery, and the price of gas futures actually rose throughout Tuesday. The prices increased by 1.74% by Tuesday afternoon, and that minor improvement shows that the market is not headed for a lengthy bear trend.
The weather report for the coming weekend showed that February’s second week will likely be warmer than its first one. This resulted in a bearish outlook for the market, driving prices down after fierce ice storms caused historic highs for the market.
The weather forecasts coming out of NatGasWeather are calling for relatively cool temperatures for the rest of the week but moderate weather after that. The market should expect mild temperatures starting after the weekend and mostly dry 50-degree weather for the southern United States. The Northeast should see temperatures ranging from the 10s-30s in that same period, ensuring demand remains high across the northern half of the country.
While foreign exports of LNG are decreasing, they are not dropping as quickly as local demand. Natural gas exports remain a strong arm of the market, ensuring reserves are used up and gas futures could climb higher as we head into the weekend.
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