Natural Gas futures started this week with a gap-down amid growing concerns for fewer production cuts in 2025 despite cold weather expectations but continued to remain in an upward trend after hitting a low at $3.146 on Dec.16, 2024.
Undoubtedly, the bullish undercurrent was generated due to the formation of a bullish crossover formation by 9 DMA above the 20 DMA amid expectations for cold weather on New Year's Eve that could surge demand for natural gas.
Now, the current scenario seems to have changed after the release of a long-awaited study on the economic and environmental impacts of liquefied natural gas exports on Tuesday. This report emphasizes the need for a cautious approach to new permits.
Secondly, the incoming President Donald Trump, a big supporter of fossil fuel development, has promised to immediately end the moratorium on new LNG export permits when he returns to the White House on Jan. 20, 2025.
Thirdly, the issuance of fresh sanctions on Wednesday by the United States on several Russia-based entities over their involvement in the Nord Stream 2 gas pipeline could result in wobbling moves be the natural gas futures shortly.
Fourthly, weather forecasts show that temperatures could turn milder across northwest Europe next week, which could provide some relief to the sharp inventory withdrawals.
All these concerns indicate that the natural gas futures might remain volatile over the coming week as higher competition from Asia for LNG creates an upside risk, while an extension of Russian flows should be bearish for the prices.
Technical Analysis: Key Levels to Watch
On the daily chart, natural gas futures are teetering at a crucial point as the current scenario makes it difficult to project the demand amid growing concerns during the weeks ahead.
Natural Gas futures are currently struggling to hold at the current level due to bullish formation by the 9 DMA crossovers the 20 DMA but the upside seems to be limited at 3.494, a crucial point just below the significant resistance at $3.556.
On the bearish side, a bearish inventory announcement in today’s session could generate a fresh selling spree which could continue till this weekly closing if the natural gas futures do not defend the 9 DMA and 20 DMA.
Disclaimer: All the readers are advised to create any position at their own risk as this analysis is based only on the observations.