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Nat Gas Prices Fall Further

Natural Gas prices are continuing to fall this week with Nat Gas futures seen hitting their lowest level since early 2021 on Monday. Prices are now down over 40% YTD while the broader decline from last year’s highs is now around 74%. This is good news for the global economy, particularly countries in Europe where there were fears of a fresh spike in prices should cold weather see stockpiles eroded more quickly than usual. However, with the winter so far in Europe have been more mild than usual, gas demand has been lower, allowing current stockpiles to comfortably cover usage requirements.
 

BP Cuts Demand Forecasts

This week, BP cut its long-term demand forecasts for oil and gas which it projects will fall 5% and 6% respectively by 2035. Furthermore, the company forecasts the war in Ukraine will accelerate the switch to green energy which has already been underway in recent years. With US production has soared over the last year, while demand has been falling, natural gas prices look vulnerable to further downside near-term unless there is a material upside demand shock. Looking ahead, forecasts of much colder weather in Europe from mid-February onwards should cause some uptick in demand, helping steady prices. However, unless the weather front is much colder than forecasts or longer in duration, gas prices are unlikely to rebound too much near-term.
 

Technical Views

Nat Gas Futures (NG)

The weekly chart shows the severity of the decline in prices very clearly. The break below the rising trend line has seen the sell-off accelerating with the market now trading below the 3.389 level and fast approaching a test of the next support at 2.307. With momentum studies firmly bearish, focus remains on further downside while prices trades below 3.389.

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