Natural Gas News: Price Forecast Dips as Inventory Levels Hit Seasonal Highs

U.S. Natural Gas Prices Fall on Mild Weather Forecasts and Strong Supply

U.S. natural gas futures declined Friday, driven by forecasts of warmer-than-normal November weather, high storage levels, and steady production rates. Prices have slipped below October’s low, signaling a bearish tone as traders anticipate limited heating demand through mid-November. Despite steady liquefied natural gas (LNG) demand, ample supplies and reduced demand for heating are weighing heavily on the market.

At 14:54 GMT, Natural Gas futures are trading $2.670, down $0.037 or -1.37%.

Mild Weather Cuts Heating Demand

Forecasts from both American and European models show warmer temperatures are likely to persist across the U.S., limiting heating degree days (HDDs) and reducing natural gas demand. NatGasWeather reported that the American model adjusted its forecast by 11 HDDs lower, which decreases the immediate need for heating-related gas. This shift points to mild conditions across much of the country, particularly in the eastern and southern regions, where temperatures are expected to hover between the 60s and 80s Fahrenheit, with isolated areas even reaching the 90s.

In contrast, cooler temperatures in parts of the western and central U.S. will bring highs in the 40s to 60s Fahrenheit, though this will not significantly offset the mild conditions prevailing elsewhere. The overall demand profile remains light, as warmer weather patterns weaken market sentiment for natural gas futures in the near term.

High Storage Levels Add Bearish Pressure

Natural gas storage remains robust, further pressuring prices. As of October 25, 2024, the U.S. Energy Information Administration (EIA) reported working gas in storage at 3,863 billion cubic feet (Bcf), an increase of 78 Bcf from the previous week. These levels are 107 Bcf higher than the same time last year and 178 Bcf above the five-year average. This storage surplus suggests that natural gas supplies are more than adequate to meet current and expected demand, which is particularly light due to the mild weather outlook.

Amid steady production levels, especially with wind energy contributing to electricity generation, natural gas demand for power remains subdued. This excess in supply, combined with steady injections into storage, limits the potential for a bullish reversal in the short term.

Technical Analysis Indicates Potential Further Declines

From a technical standpoint, natural gas futures are likely to continue their downward trend. Current support sits near $2.585, with resistance around $2.764. If bearish conditions persist, prices could test lower support levels, reinforcing the market’s current negative outlook. Continued selling pressure is expected unless demand drivers change or colder temperatures emerge.

Market Forecast: Bearish Outlook for Natural Gas

Given the ongoing mild weather forecast, elevated storage levels, and lack of significant demand increases, the short-term outlook for U.S. natural gas prices remains bearish. Until colder temperatures become a more prominent factor in November, prices may struggle to rally. Traders should keep an eye on weekly EIA storage reports and updates from weather models, as unexpected deviations could introduce price volatility. However, under current conditions, the bearish pressure from supply outpacing demand is expected to persist.