Natural gas prices rebound as colder weather drives demand
Natural gas futures experienced a volatile trading session, rebounding after a dip below $3.4/MMBtu. This sharp drop came following the Energy Information Administration's (EIA) report of a smaller-than-expected natural gas storage draw.
The EIA disclosed that US utilities withdrew 116 billion cubic feet (bcf) of natural gas last week, falling short of market expectations of 127 bcf. Total stockpiles now stand at 3,414 bcf—4.7% above the five-year average but 1.9% lower than last year. Despite this setback, natural gas prices are on track for a weekly gain amid forecasts of colder-than-usual weather between January 6 and 17.
Natural gas price dynamics (Nov 2024 - Jan 2025) Source: TradingView.
Key levels and technical outlook
Natural gas prices showed resilience, recovering to $3.584 after briefly touching a key support level at $3.354. Analysts indicate that the 50-day Exponential Moving Average (EMA) at $3.495 serves as an immediate resistance point. A break above $3.607 could confirm a renewed bullish trend, with upside targets set at $3.923 and $4.199. Conversely, if prices fail to hold above the $3.354 level, further declines toward $3.164 could occur. Additionally, the 200-day EMA at $3.111 remains a pivotal long-term support.
Market dynamics and global factors
Market sentiment remains influenced by rising gas flows to US liquefied natural gas (LNG) export plants, which are expected to continue following the expiration of a Russia-Ukraine gas transit agreement. This has increased Europe’s reliance on US LNG exports, supporting overall price strength. However, the market's bullish trajectory hinges on a consistent break above $3.570, as stochastic indicators suggest potential consolidation near this level before a breakout.
As colder weather grips key regions, heating demand is projected to rise sharply, reinforcing upward pressure on natural gas prices. Analysts caution that while current forecasts support gains, geopolitical developments and fluctuating export trends will play a crucial role in determining long-term price stability.
In our earlier coverage, we highlighted the impact of the expired Ukraine-Russia transit agreement on global natural gas dynamics, alongside predictions of a cold winter driving up demand. These factors continue to shape the market's trajectory as traders remain cautious amid geopolitical developments and fluctuating LNG flows.
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