Natural Gas News: Elevated Storage, Rising Output Levels Pose Bearish Outlook

U.S. Natural Gas Futures Trade Flat as Market Eyes Weather and Production

U.S. natural gas futures remained steady on Friday as traders evaluated the impacts of weather patterns, storage levels, and production rates on the near-term market outlook. Currently, the market hovers around a crucial technical level of $2.625. A significant drop below this threshold could be imminent if production continues to rise and temperatures moderate, potentially confirming a bearish double top chart pattern.

At 13:47 GMT, Natural Gas Futures are trading $2.687, up $0.002 or +0.07%.

Bulls’ Brief Control in Early Trading

August Nymex natural gas futures saw an uptick in early Friday trading as bullish sentiment took hold, driven by demand-side fundamentals and encouraging inventory data. However, this rally was short-lived, with prices failing to sustain the gains.

Weather Patterns and Demand Outlook

According to NatGasWeather, from June 26 to July 3, strong high pressure will dominate the southern two-thirds of the U.S., leading to hot temperatures with highs predominantly in the 90s and 100s. Meanwhile, the northern third of the U.S. will experience more moderate weather, with highs in the 70s and 80s and some showers due to weak weather systems. Overall, demand is expected to be High to Very High during this period.

Storage Levels Remain Elevated

The latest data from the Energy Information Administration (EIA) indicates that working gas in storage stood at 3,097 billion cubic feet (Bcf) as of June 21, 2024. This marks a net increase of 52 Bcf from the previous week. Current storage levels are 314 Bcf higher than the same period last year and 528 Bcf above the five-year average of 2,569 Bcf. The total working gas is now above the historical five-year range.

Market Forecast

Given the high storage levels and rising production, the outlook for natural gas prices remains bearish in the short term. The market’s inability to break above recent highs suggests that any further cooling in weather patterns or continued production increases could drive prices below the critical $2.625 level, confirming a bearish trend. Traders should watch for a potential decline if these factors persist.

Technical Analysis

Natural gas futures are trading around $2.74, approaching a critical support level at $2.625. A break below this level could trigger a bearish trend, confirming a double top pattern. Resistance levels are seen at $2.885 and $3.016, while support levels are at $2.700 and $2.652. Traders should watch for potential downside momentum.