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What Is Driving the Recent Sell-Off?
The primary driver behind Monday’s sell-off appears to be a bearish shift in the weather outlook. Last Friday, forecasts projected colder-than-expected temperatures into early March, supporting prices. However, the gap down at the open indicates that over the weekend, new data emerged, potentially pointing to milder conditions. This change undermines the strong demand expectations that had been propping up the market.
Will Key Support at $4.020 Hold?
The $4.020 level is a critical price point for natural gas futures. The market’s current test of this former top comes after rejecting a high of $4.442 last Thursday. Should selling pressure persist, prices could decline further, with the next support level at $3.733. A breach of this pivot might lead to a deeper correction toward the 50-day moving average at $3.341, which is crucial for maintaining the intermediate uptrend.
Is Supply Still Tight Enough to Support Prices?
Last week’s data indicated tight supply conditions, with the U.S. Energy Information Administration (EIA) reporting a storage draw of 196 billion cubic feet (Bcf), exceeding expectations. Current storage is 5.3% below the five-year seasonal average, the tightest in over two years. Additionally, liquefied natural gas (LNG) exports remain robust, with feed gas flows to export terminals at 16 Bcf/day, up 5.5% week-over-week. However, if warmer weather reduces heating demand, the supply tightness might not translate into continued price support.
Can Natural Gas Prices Recover This Week?
For natural gas futures to regain bullish momentum, a return of colder weather would be critical. Last week, traders were eyeing a potential push above $4.476 as a bullish signal, with resistance at $4.757. Now, however, the focus has shifted to whether the market can maintain support at $4.020 or if it will slide toward $3.733.
Market Forecast: Bearish with Key Support in Focus
The natural gas market’s outlook has turned bearish in the short term. The shift in weather forecasts has dampened sentiment, and unless fresh cold fronts emerge, traders should brace for potential declines. A sustained break below $4.020 could accelerate losses, with $3.733 and $3.341 as key downside targets. While supply factors remain supportive, weather-driven demand will likely dictate price action in the days ahead.
More Information in our Economic Calendar.
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