Natural Gas News: Pressured by Long Liquidation After Breaching Key Support

U.S. Natural Gas Futures Decline Sharply Amid Market Concerns

U.S. natural gas futures experienced a significant drop on Monday as traders assessed the impacts of weather patterns, storage levels, and production rates on the near-term market outlook. A decisive break below the $2.625 mark has prompted aggressive long liquidation, signaling potential further declines if production continues to rise and temperatures moderate.

At 13:20 GMT, Natural Gas futures are trading $2.560, down $0.041 or -1.58%.

Weather Patterns and Demand Outlook

According to NatGasWeather,  strong high pressure will dominate the southern two-thirds of the U.S., resulting in hot temperatures with highs predominantly in the 90s and 100s. In contrast, the northern third of the U.S. will experience more moderate weather, with highs in the 70s and 80s accompanied by some showers due to weak weather systems. Overall, demand for natural gas 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 represents 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, indicating ample supply in the market.

Production Rates and Market Impact

Rising production rates continue to exert downward pressure on natural gas prices. The market’s inability to break above recent highs, combined with elevated storage levels, suggests a bearish outlook. If production continues to increase and weather patterns shift towards cooler temperatures, further declines in prices are likely.

Market Forecast

Given the high storage levels and rising production, the short-term outlook for natural gas prices remains bearish. The market’s recent performance, unable to surpass recent highs, points to potential further declines. Any moderation in weather patterns or continued increases in production could drive prices sharply lower, reinforcing the bearish sentiment. Forecaster Maxar Technologies indicated that weather forecasts have shifted cooler for the Midwest for July 2-6, adding to the bearish outlook for natural gas prices.

In conclusion, traders should brace for continued volatility in the natural gas market. The combination of high storage levels, rising production, and shifting weather patterns is likely to keep prices under pressure in the near term.

Technical Analysis