Natural gas prices have halted the slide from December highs and will look to reclaim the bullish uptrend.
NGAS – Daily Chart
The price of NGAS soared to highs near 5.50 in December but has now dropped back to 3.80. The market now has a chance to move back toward the highs, with a clear support level in place if weakness appears.
Natural gas prices rose after the winter weather outlook called for colder temperatures. That ended up being less severe than expected, and prices have seen the real cooling.
U.S. prices have slumped through January, while China’s LNG prices also fell to the lowest in five years. Bloomberg said the wholesale price per million British thermal units of LNG had dropped to $10.72, the weakest since 2021. Chinese wholesale LNG prices had dropped to around $500 per metric ton.
Traders have said the price drop was due to a combination of factors, including high gas storage levels and excess supply, alongside a milder weather outlook.
A slide in U.S. storage levels last week has put a floor under gas prices for now. The EIA reported a 167 Bcf withdrawal from storage for the week ending December 12, just below expectations of -169 to -174 Bcf.
Traders had been hoping for a larger draw, but warmer temperatures led to weakness. Once winter weather subsides, the outlook for gas may turn bearish, and traders should be wary of the current bounce, which may run out of steam if further storage gluts emerge in January and February.
