Natural Gas News: Traders Eye $2.252 Resistance as Prices Rebound – Will It Hold?

Prices Climb as Traders Eye Key Resistance Levels

U.S. natural gas futures saw a slight increase on Tuesday as counter-trend buyers continued to push prices higher, building on last week’s low of $2.021.

Despite the overall bearish trend, the market is attempting to extend gains from the previous week, targeting the first upside resistance at $2.252. This level represents the pivot in the short-term range of $2.482 to $2.021. Traders anticipate sellers will defend this level aggressively, but if prices break through, it could trigger further gains towards the down-sloping 50-day moving average at $2.403.

At 13:12 GMT, Natural Gas Futures are trading $2.137, +$0.010 or +0.47%.

Market Focus Shifts with End of Summer Storage Season

September 1 marked a significant shift in the natural gas market, transitioning from the summer storage season to the winter withdrawal period. This change alters the market focus, as participants now prioritize preparing for the anticipated rise in demand during colder months.

Storage levels become a critical factor in determining winter prices, with the October contract, now the front-month, reflecting the expected increase in market activity as heating demand rises. However, the actual impact on demand can vary significantly based on regional weather patterns, adding uncertainty to market forecasts.

Lingering Bearish Sentiment Despite Recent Uptick

Despite the recent price recovery, the market continues to grapple with bearish pressures stemming from last week’s developments. U.S. natural gas futures fell by 3.45% last week, driven by concerns over storage surpluses and weaker-than-expected weather-related demand.

The U.S. Energy Information Administration (EIA) reported a 35 billion cubic feet (Bcf) increase in storage for the week ending August 16, bringing inventories to 12.6% above the five-year average. This elevated storage level has heightened fears of oversupply, especially as the market enters a period of typically lower demand leading up to winter.

Strong Production Levels Continue to Pressure Prices

In addition to rising storage levels, strong natural gas production continues to weigh on market sentiment. Despite some production cutbacks from major players like EQT and Coterra Energy, U.S. output remains steady at approximately 101 Bcf/day. This robust production, combined with the storage surplus, has dampened the market’s ability to sustain any significant price rally, keeping downward pressure on futures.

Market Forecast

The short-term outlook for U.S. natural gas futures remains cautious, with the $2.252 resistance level in focus. A failure to break above this level would likely reinforce the bearish trend, potentially driving prices back toward the $2.021 support.

Conversely, a successful break could lead to a short-term rally targeting $2.403. However, given the prevailing oversupply concerns and strong production, the market is expected to face continued headwinds, making sustained upward momentum challenging.