On Monday (December 16th), during the U.S. trading session, U.S. natural gas futures opened with a significant drop, creating a downward gap. The continuous supply surplus, combined with warm weather reducing winter heating demand, has noticeably shifted market sentiment to a pessimistic outlook. Despite a slight decrease in production, it remains high, and the bearish fundamentals are dampening market prospects, posing a short-term continued downward risk for natural gas prices.
High Production Raises Supply Surplus Concerns
The latest data shows that U.S. daily natural gas production remains at 103.8 billion cubic feet per day. Although this is slightly below last Friday's 104.7 billion cubic feet per day, it is approximately in line with the past seven days' average. This data highlights that the pressure of supply surplus persists, with production not showing significant impact, further limiting upward market space.
Traders remain cautious about market prospects, especially given the lack of significant positive changes in supply, creating insufficient upward momentum. Warm Weather: Significant Demand Reduction
The latest weather forecast has further dampened market sentiment. Major prediction models indicate that most of the U.S. will experience warm weather in the coming week, significantly reducing heating demand. According to the latest Heating Degree Days (HDD) data, heating demand has significantly decreased, indicating that cold winter weather support for the natural gas market is waning.
Weather Forecast December 16-22:
Most of the southern and eastern U.S. will be dominated by high pressure systems, with southern temperatures generally staying between 60-70 degrees Fahrenheit and only mild levels of 40-50 degrees in the Northeast. Although temperatures are lower in the Northwest and Rocky Mountains, overall demand remains weak.
Brief Surge in Heating Demand:
By the weekend, as cold air gradually moves across the Great Lakes and eastern regions, localized heating demand may see a brief uptick. However, overall, this is not enough to change the bearish market tone.
Technical Analysis: Prices Approaching Key Support Levels
From a technical perspective, natural gas futures prices are nearing key support areas. The 50-day moving average at $3.090 and the Fibonacci retracement level at $2.993 have become key support points of interest in the market. If prices effectively break through these levels, they may further decline towards $2.836, or even reach the seasonal low of $2.588.
On the resistance side, the 200-day moving average at $3.372 is the first major resistance level, with significant resistance also within the $3.444-$3.647 range, which has repeatedly hindered sustained upward momentum in the past.
Short-Term Outlook: Bears Continue to Dominate the Market
Overall, in the short term, the bearish forces dominate the natural gas market. The dual pressure from high production and reduced heating demand poses further downside risks. Unless future weather forecasts show a renewed cold trend or supply significantly declines, the market will find it challenging to gain notable rebound momentum.
Investors should closely monitor changes in the latest weather models and production data to determine the direction of the natural gas market. Once key support levels are breached, the market may further explore lower depths.
The natural gas futures market is facing multiple pressures from supply-demand imbalances and warming weather, and prices may continue to seek bottom levels in the short term. Traders should be wary of the risk of technical support levels breaking while maintaining a high focus on supply-demand fundamentals.
