Natural Gas News: Traders Cautious as Weather Shifts and Inventory Surplus Dampens Outlook

Natural Gas Futures Near Flat After Two-Day Rally

U.S. natural gas futures remained nearly unchanged on Friday after two consecutive days of gains, marking the first such rally since early August. Despite the recent uptick, traders remain cautious, attributing the limited gains to substantial natural gas inventories. The market’s response to the latest storage data and weather forecasts suggests a highly uncertain outlook.

At 12:29 GMT, Natural Gas futures are trading $2.164, up 0.027 or +1.26%.

Storage Data Provides Limited Support

On Thursday, October Nymex natural gas futures settled higher, buoyed by the latest U.S. Energy Information Administration (EIA) Weekly Natural Gas Storage Report. The report indicated a 35 billion cubic feet (Bcf) increase in working gas in storage, slightly below the analyst consensus of 38 Bcf. While the miss provided some short-term support, the overall storage levels continue to exert downward pressure on prices. Current stocks are 228 Bcf higher than last year and 361 Bcf above the five-year average, underscoring the market’s oversupply challenges.

Weather Patterns Influence Demand

Weather forecasts continue to play a crucial role in shaping natural gas demand. According to NatGasWeather, high temperatures across most of the U.S. are expected to persist through the weekend, driving strong demand. However, a shift to more moderate temperatures is anticipated next week, particularly in the southern U.S., which could lead to a decline in demand. The transition to cooler weather could temper the bullish momentum seen in recent sessions, adding another layer of complexity to the market outlook.

Technical Indicators Highlight Key Levels

From a technical standpoint, natural gas futures are navigating a critical juncture. Immediate support is pegged at this week’s low of $2.021, with major support at $1.881. On the upside, the market faces resistance at a short-term pivot of $2.252, followed by the 50-day moving average at $2.421. These levels are crucial as traders continue to adopt a “sell the rally” strategy, reflecting a lack of confidence in sustained price increases.

Market Forecast: Bearish Bias Prevails

Given the oversupply in the market and the anticipated decline in demand due to milder weather conditions, natural gas prices are likely to face continued downward pressure. While short-term technical support may prevent a steep decline, the broader market outlook remains bearish unless significant positive catalysts emerge. Traders should remain cautious, particularly as the market approaches key resistance levels that could cap further gains.