Natural Gas Futures Under Pressure as Summer Demand Fades

U.S. natural gas futures continue their downward trend, facing significant pressure as weather-driven demand weakens. The market opened this week below critical technical levels, with growing bearish sentiment pushing prices further down.

At 13:00 GMT, Natural Gas futures are trading $1.927, down $0.029 or -1.48%.

Technical Indicators Signal Bearish Trend

Daily Natural Gas

Natural gas futures are trading decisively below both the 50-day and 200-day moving averages, emboldening short-sellers. The current environment is particularly challenging for long positions, with bears targeting the recent low of $1.882. Some market participants are even eyeing targets as low as $1.60 or $1.48 if current conditions persist.

Weather Forecasts Dampen Demand Expectations

NatGasWeather reports that national demand will be high to very high for the next 6 days, then ease to moderate-high for the 7-15 day period. While the southern two-thirds of the U.S. will experience very warm to hot temperatures, the northern U.S. is expected to cool into the upper 60s to 80s, reducing overall demand.

Storage Concerns Mount

Last week’s higher-than-expected build in natural gas storage has intensified fears of a supply glut. The Energy Information Administration (EIA) reported an injection of 35 billion cubic feet (Bcf) for the week ending August 16, surpassing expectations. Despite production cutbacks from major players like EQT and Coterra Energy, oversupply concerns persist, with lower 48 states’ production still around 101 Bcf/day.

Market Volatility and Contract Expiration

The natural gas market experienced significant volatility last week, with futures ending down 4.76%. As the September Nymex futures contract approaches expiration on Wednesday, traders tend to sell, adding to the downward pressure. EBW Analytics Group’s senior analyst Eli Rubin notes that final settlement sessions have posted losses for the expiring front month in seven straight months.

Market Forecast

The outlook for natural gas remains bearish in the near term. With summer demand waning and storage levels high, prices are likely to struggle. The market is vulnerable to further declines, with $1.882 serving as a key support level. Breaking this level could trigger additional selling. While potential late-summer heat waves might provide temporary support, a significant price recovery is unlikely before the winter heating season. Traders should closely monitor upcoming EIA storage reports, weather forecasts, and global demand trends for any signs of a shift in market trends.