Weather Outlook – Warm front temporarily dampens demand

The current weather outlook paints a mixed picture for natural gas demand. Between December 24 and 29, a strong cold front gripped the Midwest, Ohio Valley, and Northeast, with highs in the 20s and 30s and lows dipping into the 90s. This regional cooling has boosted heating demand, contributing to strong prices last week. However, the rest of the United States experienced much milder conditions, with temperatures ranging from 50 to 70 degrees, which dampened overall demand.

Looking ahead, forecasts indicate a warming trend that will extend across most of the United States over the coming weekend. By then, much of the country, including northern states, is expected to experience high temperatures in the 30s to 50s, while southern areas will see temperatures reaching the 70s. This trend is expected to temporarily suppress the heating demand, leading to a lull in prices as the market digests the softer outlook.

January Cold Front – Potential for Renewed Demand

With near-term forecasts pointing toward warming, traders are closely watching in early January for the next weather-related catalyst. Between January 2 and 6, models suggest the return of colder than normal conditions, a development that could significantly boost demand. Historical data indicates that the period from December 23 to January 1 could be among the warmest in the last 50 years, but a pronounced shift to freezing temperatures in January could quickly reverse that trend.

Market participants are well aware that any deviation from this anticipated cold snap could lead to profit-taking and a broader pullback. However, if the cold trend materializes and persists, it will likely justify the current bullish sentiment and could drive prices higher in the new year.

Market Forecast – Testing Key Resistance