Natural Gas News: Can Prices Rally, or Will Oversupply Keep Pressure On?

Natural Gas Market Weekly Recap: Weak Demand and Technical Support Limit Price Action

Natural gas futures displayed strong gains last week, settling at $2.560, a 13.37% increase after a successful test of the critical support level at $2.201. Despite this uptick, the overall market sentiment remains bearish, driven by several fundamental factors including mild weather, high storage levels, stable production, and soft demand both domestically and internationally.

Mild Weather Restrains Heating Demand

Unseasonably warm weather across much of the U.S. continued to depress natural gas demand last week. October temperatures ranged predominantly from the 60s to 80s, especially in the southern and western states, significantly reducing heating requirements. Only limited pockets in the Northwest and Upper Midwest saw cooler weather, with highs in the 40s to 50s and lows in the 20s to 30s, providing minor demand support. These mild conditions are expected to persist into early November, dampening demand prospects just as winter approaches​​.

LNG Exports Decline Amid Maintenance

Liquefied natural gas (LNG) exports, a critical demand component, faced additional pressure last week due to maintenance issues. Feed gas flows to LNG terminals dropped by 0.7 Bcf/d, marking two consecutive days of declines, largely due to reduced activity at the Cameron LNG facility in Louisiana. Although 27 LNG vessels departed U.S. terminals carrying 101 Bcf of gas, steady exports have yet to offset the market’s bearish tone. The export slowdown is amplifying downward pressure amid weak domestic demand​​.

Bearish Storage Report Weighs on Prices

The latest EIA storage report added further downside pressure. For the week ending October 18, natural gas inventories rose by 80 Bcf, bringing total storage to 3,785 Bcf—167 Bcf above the five-year average. This robust storage level, coupled with muted demand, has led to persistent selling pressure, even as the winter heating season approaches. Traders remain cautious, with any rally likely capped by resistance at key technical levels around $2.610​​.

Technical Analysis: Resistance and Potential Downside Risk

From a technical perspective, natural gas futures are facing strong resistance within the $2.510-$2.610 range, where sellers are expected to re-enter. The primary support level remains at $2.201, a critical threshold that, if breached, could see prices slide to the next major support level near $1.883. The pivot point at $2.610 remains a potential target for any upside movement, although bearish market fundamentals are likely to restrict a sustained breakout​.

Outlook for Next Week: Bearish with Limited Upside

In the week ahead, natural gas prices are likely to remain under pressure from continued mild weather and high storage levels. Traders should be cautious of potential volatility as any unforeseen drop in temperatures or supply disruptions could provide short-lived price support. However, with a persistent oversupply situation and a weak demand forecast, the bearish trend is expected to continue, positioning the market for further tests of the $2.201 support level barring a major shift in weather or demand patterns.