Natural Gas News: Mixed Market as Key Resistance Levels Hold Futures in Check

Natural Gas Futures See Mixed Outlook Amid Supply and Demand Uncertainty

Natural gas futures are trading mixed on Monday, hovering below last week’s high of $2.932. Resistance sits at a 50% retracement level of $2.937, with the 200-day moving average at $2.970 presenting another key technical barrier. While traders often sell into these resistance levels, the market faces a blend of bullish and bearish factors, making the near-term outlook uncertain.

At 12:44 GMT, Natural Gas futures are trading $2.880, down $0.022 or -0.76%.

Bullish Drivers: Supply Disruptions and Winter Demand

Several factors could trigger a bullish move in natural gas prices. One primary driver is the potential for supply disruptions in the Gulf of Mexico (GOM), a significant hub for U.S. natural gas production. While production remained stable last week despite Hurricane Helene, further storms or unplanned outages could create tighter supply conditions. With hurricane season ongoing, any new disruptions in the GOM could lead to price spikes.

Winter demand is another critical factor. As temperatures drop, demand for natural gas, particularly for heating, tends to rise. If winter arrives early or is harsher than expected, this increased demand could deplete existing storage levels, tightening the market and supporting higher prices. Additionally, international factors, such as supply concerns in Europe due to geopolitical risks and infrastructure delays, could drive up demand for U.S. liquefied natural gas (LNG) exports, further tightening domestic supply.

Bearish Factors: High Production and Mild Weather

On the flip side, several bearish factors could weigh on prices. U.S. production remains near record highs, with output holding steady at around 100 Bcf/day. This strong production has helped keep the market well-supplied, limiting the potential for major price increases. Barring significant supply disruptions, this surplus could continue to cap prices.

Moreover, the latest Energy Information Administration (EIA) report indicated a 47 Bcf build in storage, pushing total inventories to 3,492 Bcf. This is 159 Bcf higher than last year and 233 Bcf above the five-year average, providing a strong buffer heading into winter. With ample storage, the market is less vulnerable to sudden supply shocks, which could limit upward price movement.

Mild weather across much of the U.S. is also curbing demand for natural gas, particularly for residential and commercial heating. If these conditions persist, weak demand could continue to pressure prices. Even though Hurricane Helene caused power outages for millions, the impact on overall demand has been limited, further reducing the likelihood of significant price gains.

Outlook: Range-Bound Trading with Key Resistance Levels

In the near term, natural gas markets are likely to remain range-bound, influenced by both supply and demand factors. Prices face strong resistance at $2.937 and the 200-day moving average at $2.970. A break above these levels could trigger a bullish move, driven by supply concerns or increased winter demand. However, if prices fail to breach these resistance points, downside risks remain, with the next key support level at $2.668.

Traders will keep a close eye on weather patterns and any potential supply disruptions, but with strong production and ample storage, the overall outlook remains mixed, with both bullish and bearish factors in play.