Gas price will change its trend to bearish after correction

The natural gas market is showing significant rise at the beginning of 2025 due to abnormally cold weather expected in January. According to weather forecasts, this month will become the coldest of a decade in the US, which in turn leads to remarkably growing heating demand. Cold winter months traditionally contribute to the increase in gas consumption, since people and businesses require an additional heat source. Moreover, rising gas consumption is caused by the high level of liquefied natural gas (LNG) exports, exceeding 15 billion cubic feet per day. 

The rapid demand growth resulted in gas stocks in storage facilities declining to levels significantly below last year's and close to the average in the past five years. This causes great concerns about depleting stocks before the cold. Weather conditions will continue to have a significant impact on the market and natural gas prices until the summer of 2025. Additionally, the cold can cause production disruptions, especially in the southern US regions, potentially aggravating the situation. 

The US gas prices have already surpassed $3.90, which also indicates a high level of volatility in the market. Wholesale gas prices are increasing in Europe, including the Netherlands and the UK, due to new sanctions against Russia and low inventory levels. Despite higher prices, the market reacted to lower inventories with restraint, which may indicate more challenging market conditions.

According to the technical analysis, natural gas prices experienced a correction on January 13 despite demand drivers. Given the seasonal nature of demand, a reversal of the current trend can be expected in the coming days, leading to lower prices. The prices might reach the year’s low by the end of February-March. Demand drivers are only likely to slow the decline rate, making it more gradual.

The main recommendation based on the current situation is to sell gas at the current price. Place a Stop Loss at the level of 4.000 and a Take Profit at the level of 3.656.