Natural gas futures fell sharply on Monday, reversing Friday’s rally that was driven by colder weather forecasts for February. The weekend update brought a significant shift, revising forecasts back to milder conditions, prompting strong selling at the market’s reopen. With technical momentum weakening and weather demand softening, traders are eyeing critical support levels for further directional cues.
At 17:18 GMT, futures were trading at $3.638, down $0.389 or -9.66%. The abrupt reversal in weather forecasts played a central role in Monday’s sell-off. On Friday, colder February projections led to a midday price spike.
However, updated weekend data pointed to warmer-than-expected temperatures across much of the U.S. for early February. Moderate demand is expected this week as most regions see above-average temperatures, apart from the colder Midwest and Northeast. Additionally, natural gas spot prices have eased following a mid-January freeze that caused a 9 Bcf supply reduction and spiked demand.
With milder weather in the near term, traders anticipate a lower call for heating, putting downward pressure on futures prices. From a technical perspective, natural gas futures are under pressure despite the primary trend remaining upward.
Natural gas futures shift lower
The daily chart shows pivotal resistance at $3.850 and $4.053. If prices breach the $3.711 support level, a sharper decline toward $3.330 could occur. Below that, traders should monitor the 50-day moving average at $3.258 and the 200-day moving average at $3.036, both potential downside targets.
Momentum is currently tilted to the downside, suggesting the path of least resistance is lower. As February contracts approach expiration this week, volatility could increase further, creating challenges for traders managing near-term risk. Natural gas demand is forecasted to remain moderate this week.
A chilly weather system is expected to bring colder temperatures to the Midwest and Northeast, but milder conditions across most of the U.S. will likely offset significant heating demand. While colder air could return to the Pacific Northwest and Mountain West next weekend, it is unlikely to provide the sustained boost necessary to reverse the current bearish sentiment. Given the warmer weather outlook and technical weakness, natural gas futures appear to be leaning bearish in the short term.
A breach of $3.711 could trigger further selling, targeting key support levels. However, traders should prepare for heightened volatility as February contracts expire this week. For now, the market’s direction hinges largely on any further revisions to weather forecasts and the pace of demand recovery in colder regions.