Natural Gas News: Could Warmer Weather and Soft Demand Stall Any Bullish Reversal?

Natural Gas Futures Edge Higher, But Bearish Fundamentals Still Dominate

U.S. natural gas futures closed last week slightly higher, with May contracts settling at $4.065, a 1.85% weekly gain. The modest rebound came after bargain buying and longer-term demand optimism helped prices recover from early-week losses. However, traders remain cautious, as short-term fundamentals continue to weigh heavily on sentiment.

Is Weather-Driven Demand Still Too Weak to Lift Prices?

Weather forecasts through early April remain unfavorable for natural gas consumption. With much of the U.S. experiencing warmer-than-normal temperatures, residential and commercial heating demand continues to lag. Power sector consumption is also soft, with wind generation reducing the need for gas-fired electricity. While LNG feedgas flows remain elevated near 16 Bcf/d, they’ve been insufficient to offset domestic demand erosion tied to mild weather.

How Did Storage Data Reinforce Market Concerns?

The latest EIA report showed a 37 Bcf injection for the week ending March 21, surpassing expectations and reversing the typical seasonal draw. This marks the second straight week of net additions, suggesting an early onset of the injection season. Working gas in storage now stands at 1,744 Bcf, still below historical norms but rising quickly. The combination of weak demand and rising inventories has amplified bearish sentiment among traders.

Are Supply Trends Adding to the Pressure?

Production remains robust, with Lower 48 dry gas output rising to 106.8 Bcf/d, up nearly 5% year over year. This elevated supply level is colliding with muted consumption, adding to the imbalance. Meanwhile, speculative traders have been pulling back aggressively. Over the past two weeks, long positions have been cut by 58,000 contracts, indicating waning confidence in near-term upside.

Could Structural Demand Trends Shift the Balance?

Some longer-term demand drivers are still on the radar. The potential approval of new LNG terminals, including the Commonwealth project in Louisiana, supports the bullish case for export growth. In the utility sector, electricity generation rose slightly year over year, providing a thin layer of demand support. But in the near term, these factors remain too incremental to materially shift pricing.

Market Forecast: Short-Term Bias Remains Bearish

Despite last week’s modest rebound, the natural gas market remains under bearish pressure. Rising storage, subdued weather-driven demand, and firm production levels suggest downside risk persists. Without a shift in weather or meaningful supply disruption, futures are likely to struggle in the near term.

Technically, the main trend is up on the weekly chart, but momentum is trending lower, following the confirmation of the closing price reversal top at $4.192 from the week-ending March 14.

The short-term range is $2.957 to $4.912. Trader reaction to its pivot at $3.935 will determine the direction of the market this week.

A sustained move over $3.935 will signal the presence of buyers. If this move creates enough momentum, we could see a surge into $4.322.

A sustained move under $3.935 will indicate the presence of sellers. This could trigger an acceleration into a longer-term pivot at $3.361.

The major support is the 52-week moving average at $2.862.

More Information in our Economic Calendar.