Natural Gas News: Futures Slide as Production Rises

Early Weakness in Natural Gas Futures

U.S. natural gas futures faced early pressure on Monday as rising production and declining LNG feed gas demand overshadowed the impact of extremely hot weather. July Nymex natural gas futures were down for the fourth consecutive session, continuing the bearish trend from last week.

At 13:26 GMT, Natural Gas futures are trading $2.819, down $0.062 or -2.15%.

Market Reactions and Key Drivers

Despite forecasts predicting the hottest weather pattern of the past 45 years, natural gas prices declined. The strong selling pressure can be attributed to the announcement that the Mountain Valley Pipeline (MVP) became operational late last week, adding to the supply concerns. Robust production levels and lower LNG feed gas demand further weighed on market sentiment.

NatGasWeather Insights

NatGasWeather reported that natural gas prices are down after the weekend break, marking the fourth straight session of declines. This downward trend persists even with both the GFS and EC models forecasting an extremely hot weather pattern. The 15-day forecast indicates the hottest conditions in the past 45 years based on cumulative cooling degree days (CDDs).

Weather Forecast: June 17-23

Strong high pressure is expected to dominate much of the southern and eastern U.S. this week, with temperatures ranging from the upper 80s to 100s. Chicago is forecasted to reach mid-90s on Monday, followed by 90s across most East Coast cities from Tuesday to Thursday. In contrast, the Northwest to Northern Plains will experience cooler temperatures with highs in the upper 50s to 70s due to weather systems tracking through with showers. Overall, the demand for natural gas is projected to be high.

Last Week’s Recap: Diverging Markets

Last week saw a divergence between futures and cash markets. While futures tumbled due to rising production and a tempered heat outlook, the cash market experienced a surge as users scrambled to secure supplies for the anticipated heatwave. This divergence highlighted the conflicting forces influencing the market.

Supply and Storage

The bearish sentiment in the futures market was further supported by the EIA’s storage report, which revealed comfortable storage levels exceeding last year’s figures and the five-year average. Production in the Lower 48 states rebounded to a robust 100 Bcf/d, adding to the market’s oversupply concerns.

Market Forecast: Bearish with Bullish Reservations

Despite the extremely hot weather forecast and high demand, the short-term outlook for natural gas futures remains bearish due to ample storage, rising production, and the MVP’s operational status. However, the impending heatwave could provide some support for cash prices. Traders should closely monitor storage reports, pipeline developments, and weather updates to navigate the ongoing tug-of-war between bullish and bearish forces.

Technical Analysis

Natural gas futures are sharply lower on Monday after gapping on the daily and weekly charts.

The short-term range is $2.518 to $3.159. The market is currently trading below its pivot at $2.840, suggesting further downside potential. Should the downside momentum increase then I think it’s reasonable to expect a pullback into a longer-term pivot at $2.652, followed by the 50-day moving average at $2.578.

On the upside, the resistance is the 200-day moving average at $2.937.