- Changing weather patterns and EIA forecasts indicate a tough short-term outlook for natural gas.
- Increasing global demand and the energy transition suggest a positive long-term outlook.
- Support levels around $3.70 may dictate whether the ongoing correction continues or stabilizes.
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The recent upward momentum for natural gas has hit a snag, resulting in a price correction. This downturn is attributed to several factors, including the U.S. Energy Information Administration’s (EIA) prediction of lower average prices for this year compared to existing levels. Additionally, updated weather forecasts suggest milder temperatures in the near term, leading to reduced heating demand and strengthening the position of sellers.
While the short-term outlook appears bleak, the long-term perspective is more promising. Structural mismatches between supply and demand, combined with natural gas’s critical role as a transition fuel in the global energy evolution, could drive average prices higher in the coming years. However, uncertainty remains regarding energy policies under President Donald Trump, who has consistently advocated for increased natural gas and oil production.
EIA Projects Long-Term Increases in Natural Gas Prices
The latest EIA forecasts indicate that natural gas prices may rise in the upcoming years, despite current weakness. Notable updates include:
- Q1 2025: $3.21 per MMBtu, up from $2.91 in December.
- 2025: $3.14 per MMBtu, compared to a previous estimate of $2.95.
- 2026: $3.97 per MMBtu.
This optimistic outlook is driven by a surge in demand, which is expected to significantly outstrip supply growth in the U.S. (3.2 billion MMBtu versus 1.4 billion MMBtu). Moreover, Asian markets have increased their imports, and Europe continues to depend on U.S. natural gas as it moves away from Russian sources.
Complex Storage Trends
Current storage data presents a mixed bag for traders. While natural gas storage levels in many U.S. states are 6% above historical averages, year-over-year comparisons show a modest 3% drop. With the heating season still in play, upcoming price fluctuations will largely depend on temperature variations. If these trends persist, prices might fall below the crucial $3 per MMBtu threshold.
Technical Analysis of Natural Gas
Natural gas contracts at Henry Hub have approached a resistance level just below $4.40 per MMBtu, suggesting this may be a peak for the year. The current correction has stalled around the $3.70 per MMBtu support level, which is pivotal for traders to monitor.
If sellers manage to push prices below this support level, the next targets would be $3.50 and $3.30 per MMBtu, potentially accelerating the bearish trend.
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Disclaimer: This article is intended for informational purposes only and does not aim to encourage any asset purchases. It is not a solicitation, offer, recommendation, or suggestion to invest. Please remember that all assets carry significant risks, and any investment decision and its associated risks lie with the investor. We do not provide investment advisory services.
