Natural Gas News: Bearish Pressure Remains as Seasonal Transition Begins

Natural Gas Futures Rise as Seasonal Transition Begins, but Bearish Sentiment Lingers

U.S. natural gas futures edged higher in light trading on Monday, despite U.S. markets being closed for Labor Day. The market is attempting to secure a third gain in four days following the August 28 rollover into the October contract. However, recent bearish trends persist, with last week’s trading dominated by concerns over storage levels and demand patterns.

At 12:52 GMT, Natural Gas futures are trading $2.177, up $0.050 or +2.35%.

Seasonal Transition and Market Impact

September 1 marks an important shift in the natural gas market, signaling the end of the summer storage season and the start of the winter withdrawal period. This date is crucial for several reasons:

• Storage Cycle: From September onward, the market focus moves from storing gas to preparing for winter withdrawals, which typically peak around November 1. Storage levels at this time are key indicators for winter pricing.
• Demand and Pricing: As cooler weather approaches, heating demand rises, increasing natural gas consumption. The October contract, now the front-month, often reflects this change, leading to more market activity.

Though September 1 serves as a standard industry marker, actual demand shifts can vary due to regional weather conditions, adding complexity to market expectations.

Bearish Trends and Storage Concerns

Despite recent gains, the market is still feeling the effects of last week’s downturn. U.S. natural gas futures dropped 3.45% last week, driven by larger-than-expected storage increases and reduced weather-related demand. The U.S. Energy Information Administration (EIA) reported a 35 billion cubic feet (Bcf) rise in storage for the week ending August 16, pushing levels 12.6% above the five-year average. This surplus has raised concerns of oversupply as the market enters the lower-demand period before winter.

Production remains strong despite cutbacks from major producers like EQT and Coterra Energy, with output stable at around 101 Bcf/day. This robust supply, coupled with rising storage levels, has weighed heavily on market sentiment.

Market Forecast: Continued Bearish Pressure

The outlook for natural gas remains bearish. High storage levels, steady production, and weaker demand point to further price declines. The $2.021 support level is critical; a break below this could trigger more aggressive selling.

While late-summer heat might offer brief support, a significant price recovery is unlikely before winter. However, things could get interesting if the market can overcome a pivot at $2.252. Look for an even bigger reaction if the market reaches the 50-day moving average at $2.403. Traders should stay vigilant, monitoring EIA storage data, weather trends, and global demand. The bearish trend is expected to persist in the near term.