Natural Gas News: Will Bearish Momentum Push Prices Below Key Support Levels Next Week?

Bearish Sentiment Dominates as Storage Concerns Weigh Heavily

U.S. natural gas futures faced significant downward pressure last week, settling down 3.45%. The market remains entrenched in a bearish trend, driven by growing concerns over storage levels and weakening weather-driven demand. Prices fell below critical technical levels, sparking fears of further declines as the market approaches the shoulder season.

Technical Weakness Signals Further Declines

Natural gas futures continued their slide last week, pressured by a combination of technical weakness and oversupply concerns. Prices remain decisively below both the 50-day and 200-day moving averages, emboldening short-sellers. The market’s bearish momentum intensified as futures closed at $2.022, down 4.76% for the week, and dangerously close to the key support level of $1.882. A breach of this level could trigger further selling, with some market participants eyeing targets as low as $1.60 or even $1.48.

Storage Data and Supply Concerns

The bearish sentiment was exacerbated by higher-than-expected storage builds. The U.S. Energy Information Administration (EIA) reported a 35 billion cubic feet (Bcf) increase in natural gas storage for the week ending August 16, surpassing market expectations. This build pushed current storage levels 12.6% above the five-year average, heightening fears of a supply glut as the market moves into the lower-demand shoulder season.

Despite production cutbacks from major producers like EQT and Coterra Energy, overall supply remains robust, with Lower 48 states’ production hovering around 101 Bcf/day. The market also faced volatility from the transition into the October futures contract, with traders selling off positions, adding to the downward pressure.

Weather-Driven Demand Eases

Weather patterns, which play a crucial role in natural gas demand, have shifted, further dampening market sentiment. While much of the U.S. experienced high temperatures, particularly in Texas, forecasts indicate a transition to cooler conditions, especially in the northern regions. This expected shift in temperatures could lead to a significant drop in natural gas demand, weakening any near-term price support.

Additionally, high coal stockpiles are adding indirect pressure on natural gas prices. Analysts warn that long-term coal contracts could lead to uneconomic decisions to burn coal, even with low dark spreads, posing a bearish threat to electricity markets and, by extension, natural gas prices.

Market Forecast: Continued Bearish Pressure

Looking ahead, the outlook for natural gas remains bearish. The combination of high storage levels, weakening weather-driven demand, and technical weakness suggests further price declines. The key support level at $2.021 is critical; if breached, it could lead to accelerated selling with potential targets at $1.882 or lower.

While late-summer heat waves might offer temporary relief, a significant price recovery is unlikely before the winter heating season begins. Traders should stay cautious, closely monitoring upcoming EIA storage reports, weather forecasts, and global demand trends. The bearish trend is expected to continue.