Natural Gas News: Prices Test New Lows Amid Lack Of Positive Catalysts

The price of natural gas tests new lows as traders stay focused on overproduction and high inventory levels.

The recent EIA Weekly Natural Gas Storage report indicated that working gas in storage increased by 32 Bcf from the previous week, compared to analyst consensus of +29 Bcf. Natural gas stocks are rising faster than expected despite hot weather, which is bearish for natural gas markets.

At current levels, stocks are 275 Bcf higher than last year and 496 Bcf above the five-year average of 2,638 Bcf.

In this situation, natural gas bulls need either strong demand or declining production to have a chance to break the current trend in natural gas markets.

Weather forecasts indicate that the first half of July would be hot, leading to strong demand for natural gas. However, strong demand does not provide support to natural gas prices as production is also rising at a time when inventories remain at levels that are significantly higher than the five-year average.

If the second half of July is less hot, the market may find itself under more pressure, as there are no signs indicating that production would be quickly cut in response to weather changes.

The technical picture is grim. Natural gas tests new lows almost every day, but RSI remains in the moderate territory, which means that there is plenty of room to gain additional downside momentum in the near term. Natural gas has recently managed to settle below the 50 MA at $2.52, which was a bearish signal. The nearest support level for natural gas is located in the $2.25 – $2.30 range. A move below the $2.25 level will push natural gas towards the next support level at $2.00 – $2.05. At this point, natural gas needs significant positive catalysts to break the current trend. From the technical point of view, natural gas must settle back above the 50 MA to have a chance to gain sustainable upside momentum.

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