Natural Gas: Bulls Eye $4 on Cold Weather Forecasts Amid Record Trading Volumes
- Henry Hub prices break $3 per MMBtu as cold weather drives demand higher.
- European storage drops 11%, sparking concerns of supply pressures this winter.
- Critical $3 support for Henry Hub could dictate near-term price action.
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Natural gas markets are heating up, with Henry Hub contracts breaking above $3 per MMBtu for the first time this year.
This bullish momentum has been fueled by forecasts of colder-than-average temperatures, especially in Asia, driving up global demand.
Traders are now asking: Could Europe face another energy crunch? While declining inventories and high crude prices suggest risks, Europe’s diversified energy sources and renewables may keep a crisis at bay.
Will Natural Gas Prices Continue Rising into 2025?
The U.S. Energy Information Administration (EIA) recently raised its 2025 price forecasts, predicting an average of $3.06 per MMBtu—up from $2.90 in its previous report.
Notably, Q4 2024 estimates dropped to $2.81 per MMBtu, reflecting the potential for near-term corrections. Storage levels in the U.S. remain robust, sitting 228 billion MMBtu above the five-year average.
This surplus could provide a buffer against demand spikes, curbing extreme price volatility.
Record Trading Volumes Signal Heightened Activity
Bullish interest in natural gas markets is surging. Henry Hub contracts hit a six-year volume high of 561,379 on November 21, underscoring liquidity and the potential for sharp price swings heading into December.
Traders should brace for increased volatility as seasonal demand and market speculation drive activity.
Europe’s Inventory Declines Spark Concerns
In Europe, storage inventories in key countries like Germany, Belgium, and France have dropped 11% over the past two months, marking the steepest seasonal decline since 2021.
Dutch TTF natural gas contracts, a benchmark for European natural gas, have surged to their highest levels in over a year, reflecting market unease.
With temperatures set to play a critical role, a harsh winter could intensify demand pressures, keeping European markets on edge.
Key Technical Levels to Watch
Henry Hub prices have corrected over the past week, testing a crucial support zone near $3 per MMBtu. This level aligns with a local trend line and the D-point of an ABCD corrective pattern.
A breakdown here could pave the way for further declines, potentially targeting $2.70-$2.60 per MMBtu. Traders should monitor this technical juncture closely as it could set the tone for December’s price action.
Outlook: Opportunities and Risks for Natural Gas Traders
The natural gas market presents a mixed outlook. While bullish forecasts and high trading volumes hint at continued opportunities, robust U.S. inventories and potential European supply challenges inject uncertainty.
For traders, staying attuned to technical levels and weather developments will be critical in navigating the volatile weeks ahead.
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Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, counsel or recommendation to invest as such it is not intended to incentivize the purchase of assets in any way. I would like to remind you that any type of asset, is evaluated from multiple perspectives and is highly risky and therefore, any investment decision and the associated risk remains with the investor.
