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Natural gas futures fall sharply as mild weather weakens demand

2024-10-17

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U.S. natural gas prices plunged during the U.S. session on Wednesday (October 17) in response to the weak weather outlook for the next 7-15 days. Prices failed to hold the resistance level of the 50-day moving average and prices fell sharply. Currently, traders are watching two key price levels - $2.403 and $2.305 minor support levels - as the last support before a possible decline to the major support level of $2.201.

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Technical Pressure Increases

Natural gas prices are facing increasing technical pressure after breaking below the key retracement area of $2.510 to $2.610. The failure of natural gas prices to hold above the above levels has accelerated the selling momentum, especially as traders are closely watching the weather forecast for the next two weeks. The weather forecast does not show significant cold or heat in the next two weeks. The short-term technical outlook remains bearish unless the market continues to rise above the 50-day moving average.

In addition, technical traders are closely watching $2.403 and $2.305 as key support levels. A break below this level could signal further declines in gas prices, potentially pushing gas prices toward a major bottom at $2.201.

Mild Weather Weakens Demand Outlook

NatGasWeather reports that demand will remain relatively strong across the country over the next few days as cold front remains in the Midwest and Northeast. The system is expected to bring temperatures down to highs in the 40s -50s and lows in the 20s -30s, boosting short-term demand. Beyond that, however, the forecast calls for milder weather, especially in the 7-15 day range, with no extreme weather expected across much of the country.

Demand is expected to taper off by mid-October as temperatures turn mild across much of the country, with highs between 60 and 80 degrees Fahrenheit across the U.S. Texas and the Southwest, which previously experienced high temperatures, will also cool down, further reducing overall demand.

Weekly Inventory Report in Focus

Market participants are also looking forward to Thursday's EIA weekly inventory report. Any surprises in storage data could affect prices, but expectations are tilted toward a bearish outcome as demand forecasts weaken. If inventory levels are higher than expected, it could put further pressure on prices in the near term.

Traders expect production to reach 53 billion to 90 billion cubic feet. The weekly change last year was 93 billion. The 5-year average weekly change is 89 billion cubic feet.

The outlook for US natural gas prices remains bearish as the 7-15 day weather forecast does not show significant temperature fluctuations. The market may test the $2.403 and $2.305 support levels, and a break below these levels could lead to a further decline to the critical $2.201 bottom. Any upside may depend on unforeseen weather changes or surprises in the upcoming EIA storage report. Traders should be prepared for potential volatility as these factors unfold.

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 futures fall sharply as mild weather weakens demand

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