Natural gas fell on forecasts for less cold weather and lower heating demand

Natural gas prices declined by 0.59%, settling at 234.9, driven by updated weather forecasts indicating less cold weather and lower heating demand over the next two weeks. Traders also noted that record output in the Lower 48 U.S. states provided utilities with ample supply, reducing the need to draw extensively from storage to meet heating demand. According to LSEG, average gas output in the Lower 48 U.S. states increased to 107.7 billion cubic feet per day (bcfd) in November, up from the previous record of 104.2 bcfd in October. Although daily output was expected to dip, reaching a preliminary one-week low of 106.7 bcfd, traders cautioned that preliminary data often undergoes revisions later in the day. 

Meteorologists forecast a shift in weather conditions from colder than normal to warmer than normal between November 30 and December 12. Anticipating reduced cold weather, LSEG predicted a decline in U.S. gas demand in the Lower 48 states, including exports, from 127.3 bcfd this week to 118.9 bcfd next week. These projections were lower than LSEG’s outlook earlier in the week. In terms of U.S. pipeline exports to Mexico, the average fell to 5.7 bcfd in November, down from 6.5 bcfd in October and a record 7.0 bcfd in August. 

From a technical standpoint, natural gas is undergoing long liquidation, with a 2.16% drop in open interest, settling at 42532. Support is identified at 231.4, and a breach below could test 227.9 levels. On the upside, resistance is anticipated at 238.8, and a move above could lead to prices testing 242.7.