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Natural Gas Analysis: Prices rise as cooler weather sets in, market remains bearish

2024-10-16

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U.S. natural gas futures continued to rise during New York trading on Tuesday (October 15) as traders closed their positions, expecting colder weather and increased heating demand in the Midwest and Northeast. Despite the recent gains, the overall market trend remains bearish.

Cold weather supports short-term demand

Early on Tuesday, natural gas futures rose slightly as an early cold front brought increased heating demand to much of the United States. Analysts pointed out that while the overall market remains cautious, the recent cold front provides some support. The November contract fell 13.8 cents during Monday's Columbus Day holiday trading session, falling below the key level of $2.50 for the first time since August last year.

Low temperatures in the Midwest and Northeast this week are expected to drive strong national demand, according to EBW Analytics. However, mild weather in Texas and the southern United States is expected to ease this situation, leading to weaker demand in the coming weeks as temperatures ease.

Weather Forecast: Mixed Demand

The National Weather Service weather forecast for October 15-21 calls for moderate to high demand in the first half of the week as cooler temperatures are seen across the Midwest and Northeast, with highs in the 40s to 50s and lows in the 20s to 30s. However, demand is expected to ease towards the end of the week as the southern U.S. experiences comfortable temperatures in the 70s and 80s. The balance between strong demand in the north and weak demand in the south is expected to limit upward momentum in the near term.

LNG Exports: Key Driver of Future Demand

Looking ahead, U.S. natural gas exports, particularly liquefied natural gas (LNG), are expected to be a key driver of demand. The U.S. Energy Information Administration (EIA) projects that U.S. LNG exports will increase from 12.1 billion cubic feet per day (Bcf/d) in 2024 to 13.8 billion cubic feet per day (Bcf/d) in 2025. Increased export capacity, combined with flat domestic consumption, is expected to support higher prices in the long term.

Several new LNG export facilities are scheduled to come online by the end of 2024, including the Plaquemines LNG and Corpus Christi LNG Phase 3 projects. These developments are expected to further boost U.S. natural gas exports, with the Plaquemines LNG project set to start operations in the spring of 2025 and Phase 2 in late 2025, respectively.

Market Outlook: Neutral to Bearish

While cooler weather may support natural gas prices in the short term, the overall market remains under pressure. Futures prices remain below key technical levels, and mild weather in the southern United States is expected to limit demand. However, the long-term outlook is more favorable due to increased LNG exports, which could support gradual price increases through 2025. For now, traders should maintain a cautious outlook.

The above information is provided by special analysts and is for reference only. CM Trade does not guarantee the accuracy, timeliness and completeness of the information content, so you should not place too much reliance on the information provided. CM Trade is not a company that provides financial advice, and only provides services of the nature of execution of orders. Readers are advised to seek relevant investment advice on their own. Please see our full disclaimer.

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Natural Gas Analysis: Prices rise as cooler weather sets in, market remains bearish

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