U.S. natural gas futures continued their downward trend on Tuesday, following significant losses from the previous day. Prices were pressured by high production levels and warmer-than-expected weather forecasts, which dampened demand expectations. As of 13:29 GMT, natural gas futures were trading at $3.191, a decrease of $0.023, or -0.72%.
Milder Weather Weakens Heating Demand
The outlook for natural gas demand weakened further as weather forecasts turned notably warmer. The change in weather models led to a reduction in heating degree days (HDDs), a key indicator of heating demand. According to NatGasWeather, the GFS model dropped by 26 HDDs, while the ECMWF model showed a 19 HDD reduction. This shift aligns both models with warmer trends, signaling lower heating demand.
From December 16-22, high pressure is expected to dominate the southern and eastern U.S., pushing temperatures into the 60s and 70s across the southern states and the 40s and 50s in the Northeast. Although a brief cold spell could boost demand over the weekend, overall demand is expected to remain weak through Friday.
Strong Production Exacerbates Oversupply
Natural gas production remains robust, contributing to the ongoing oversupply concerns. Output was reported at 103.8 Bcf/d on Monday, just below the previous day’s 104.7 Bcf/d, but consistent with the seven-day average. With production staying above 103 Bcf/d, the supply side remains plentiful, leaving little room for price increases unless demand sees a significant uptick.
Limited Support from LNG Export Sector
Although there have been positive developments in the LNG export sector, including the milestone achieved at the Plaquemines liquefaction facility, these factors have failed to counterbalance the bearish fundamentals. The oversupply of natural gas combined with weak heating demand continues to weigh heavily on market sentiment, keeping prices under pressure.
As traders focus on key technical support levels, bearish sentiment prevails, with no immediate catalysts to reverse the trend.
