Natural Gas News: U.S. Futures Sink on High Production and Cooling Geopolitical Risks

U.S. Natural Gas Futures Plunge in Broader Energy Selloff as Oil Prices Drop

U.S. natural gas prices dropped sharply on Monday, mirroring a broad selloff in the energy sector led by crude oil declines. The energy market weakness comes as concerns over Middle East geopolitical risks ease, and traders face bearish influences from strong production levels and milder weather forecasts in the United States.

Technically, the market is trading on the weak side of the 200-day moving average at $2.536, making it resistance. Given the current downside momentum, the October 21 main bottom at $2.210 and the August 28 main bottom at $2.201 are back on the radar.

At 15:03 GMT, Natural Gas futures are trading $2.327, down $0.233 or -9.10%.

Middle East Tensions Cool, Reducing Supply Risk

Market sentiment shifted as weekend strikes by Israel targeted Iranian military installations but avoided vital oil and nuclear infrastructure. Analysts interpreted this restraint as reducing the likelihood of a regional supply disruption, including Iran’s potential closure of the Strait of Hormuz, a major chokepoint for global oil and natural gas shipments. Eli Rubin of EBW Analytics noted that Israel’s decision to focus on specific military targets rather than broader infrastructure has calmed markets, diminishing the immediate risk premium in both oil and natural gas prices.

Rising U.S. Production Adds Downward Pressure

Natural gas supply gains have intensified the bearish sentiment. According to Wood Mackenzie, production in the Lower 48 states averaged 102.8 billion cubic feet per day (Bcf/d) over the weekend, holding steady at Monday’s early estimates. This level is near the summer’s peak of 103 Bcf/d and reflects a 2 Bcf/d increase from the autumn production lows. Increased output, coupled with tempered Middle East concerns, has pressured futures as demand growth expectations weaken.

Weaker Demand Outlook on Milder Weather

Milder weather forecasts across the U.S. have also curtailed expectations for short-term demand. Seasonal temperatures are projected to limit natural gas consumption for heating, further reducing immediate market demand. With the U.S. weather-driven consumption forecast low, production increases are seen as adding to domestic supply glut concerns.

Oil’s Steep Decline Intensifies Bearish Energy Sector Sentiment

Crude oil’s dramatic decline on Monday—the steepest in two years—has also influenced natural gas trading. U.S. West Texas Intermediate (WTI) crude fell 6.26% to $67.29 per barrel, while Brent dropped 5.94% to $71.53, as reports confirmed no damage to Iranian oil operations, with Iran’s Shana news agency confirming that oil production and exports remain unaffected. Given that Iran supplies up to 4% of global oil, fears of an abrupt supply loss had buoyed prices. But with no disruptions to Iranian output, oil markets have shifted into selloff mode, impacting correlated energy assets like natural gas.

Market Forecast: Bearish Outlook for Natural Gas

With production levels near highs, weakening weather-driven demand, and reduced geopolitical concerns, U.S. natural gas prices are likely to face continued downward pressure in the short term. Any further easing of tensions or additional production gains could add to bearish sentiment. However, traders will closely monitor upcoming weather forecasts and inventory reports to assess potential support levels in the near term.