Natural Gas News: Futures Dip as Profit-Taking and Mild Weather Hit Market

U.S. Natural Gas Futures Under Pressure as Profit-Taking Emerges

U.S. natural gas futures are trading lower on Friday, retreating after a recent surge failed to break above the significant resistance level at $2.315. The market tested $2.301 on Thursday but encountered selling pressure as traders opted to take profits. This hesitation to push prices higher suggests a potential short-term decline, with a key support level at $2.091 likely to be tested in the near term.

Milder Weather Outlook Weighs on Bullish Momentum

The decline in futures is also attributed to a shift in market focus from bullish storage data to forecasts of milder weather. The U.S. Energy Information Administration (EIA) reported a rare summer withdrawal of 6 Bcf from storage for the week ending August 9, 2024, reducing total working gas in storage to 3,264 Bcf. While this figure is 209 Bcf higher than the previous year and 375 Bcf above the five-year average, the market’s attention has turned to expectations of cooler temperatures, which could dampen demand in the coming weeks.

The EIA’s report marked the first summer drawdown since July 2016 and the first August decrease since 2006, reflecting heightened cooling demand amid extreme summer temperatures. Despite this bullish indicator, traders remain cautious, with the potential for softer demand due to moderating weather conditions.

Investment and Geopolitical Challenges Loom

The natural gas market’s outlook is further complicated by weak investment and ongoing geopolitical tensions. Reduced capital expenditure in the sector has stalled the development of new projects, while supply chain disruptions and risks from conflicts in Ukraine and the Middle East continue to pose challenges. Alessandro Valentino, Product Manager at VanEck, noted that these factors, combined with slower-than-expected global economic growth, suggest that significant price increases are unlikely in the short term.

Market Forecast: Bearish Near-Term Outlook

Given the current market dynamics, including profit-taking, milder weather forecasts, and investment challenges, the near-term outlook for U.S. natural gas futures appears bearish. Prices may continue to face pressure, with potential declines toward the $2.091 support level as traders remain hesitant to buy at current levels.

Technical Analysis

Natural gas futures are lower on Friday after traders rejected the main top at $2.315 the previous session, forming a new minor top at $2.301. The current price action suggests a break through minor support at $2.149 could lead to a test of the 50% level formed by the $1.882 to $2.301 trading range at $2.091.

A shift in the weather pattern back to bullish later in the session could drive prices through $2.315 and into the 50-day moving average at $2.445.