Natural Gas News: Market Straddles Key Pivot at $2.252 as Traders Weigh Bearish Signals

U.S. Natural Gas Futures Slip as Storage Levels Remain High

U.S. natural gas futures are slightly lower this Friday after a strong performance on Thursday, which was supported by weak government inventory data and reduced production levels. These factors provided temporary relief to the market but were not enough to sustain upward momentum. Traders now focus on key technical levels that could influence price movements.

At 12:49 GMT, Natural Gas futures are trading $2.253, down $0.001 or -0.04%.

EIA Storage Report Shows Modest Increase

The U.S. Energy Information Administration (EIA) reported a 13 billion cubic feet (Bcf) increase in natural gas storage for the week ending August 30, 2024. This brings total storage to 3,347 Bcf, which is 208 Bcf higher than the same period last year and 323 Bcf above the five-year average of 3,024 Bcf. The current surplus stands at 11%, keeping pressure on prices despite a relatively modest weekly injection.

Key Technical Levels in Play

Natural gas futures are trading near a crucial pivot at $2.252. A sustained move above this level could lead to a test of the 50-day moving average at $2.353. However, market fundamentals remain bearish, and sellers may emerge at this level, given the broader downtrend. If the market breaks through the 50-day moving average, it could trigger a rally, potentially pushing prices toward the 200-day moving average at $2.857.

On the other hand, a drop below $2.252 could lead to a test of support at $2.145. If this level fails, prices could fall further, with targets at $2.021 and $1.882.

Production and Demand Outlook

U.S. natural gas production remains strong, with output estimated at 101 Bcf per day. While this high production rate has been a major factor in limiting price increases, a slight reduction earlier this week helped stabilize the market. Liquefied natural gas (LNG) exports continue to provide support, even as the Atlantic hurricane season poses a risk to export infrastructure.

However, mild weather conditions are keeping overall demand moderate. NatGasWeather forecasts temperatures across much of the U.S. to remain in the 60s to 80s, which limits cooling demand. Although higher temperatures persist in the southern U.S. and parts of the West, national demand is expected to stay moderate over the next week, reducing the likelihood of a significant price rally.

Market Forecast

In the short term, U.S. natural gas futures are expected to remain under pressure due to high storage levels and strong production. While a break above key resistance at $2.353 could lead to a short-term rally, the overall market outlook remains bearish. Traders will be closely watching weather forecasts and production trends as the focus shifts to winter heating demand, but elevated storage levels are likely to keep price gains in check.