Natural Gas News: Will Today’s Rally Break the $2.252 Resistance in Bearish Market?

Natural Gas Futures Edge Higher Amid Bearish Trends

U.S. natural gas futures are seeing a slight uptick as of Wednesday, with prices edging higher following last week’s low of $2.021. Despite an overall bearish trend, counter-trend buyers are attempting to push prices towards a key resistance level at $2.252.

The $2.252 level marks a pivotal point in the short-term range of $2.482 to $2.021. Many traders expect sellers to defend this area aggressively, though a breakout could lead to further gains, potentially reaching the 50-day moving average at $2.385. Still, traders remain in a “sell the rally” mindset, which could cap any significant upward movement.

At 12:25 GMT, Natural Gas Futures are trading $2.232, up $0.029 or +1.32%.

Production Slowdown and LNG Demand Support Prices

Natural gas futures reversed early losses on Tuesday to close higher, buoyed by a reduction in supply and strong demand for liquefied natural gas (LNG). As the month began, U.S. natural gas production slightly dialed back, helping to ease concerns of an oversupplied market. Additionally, despite the ongoing hurricane season, LNG exports have remained steady, providing further support for prices. These bullish factors are carrying over into the current trading session, as market participants weigh the balance between supply cuts and demand stability.

Weather Forecasts Point to Lower National Demand

According to NatGasWeather, cooler temperatures across much of the U.S. are expected to reduce national demand for natural gas. From September 3-9, weather systems will bring comfortable highs in the 60s to 80s across much of the U.S., limiting the need for air conditioning. However, hotter conditions are forecast for the western and southern regions, with temperatures reaching into the 90s. This localized heat is unlikely to offset the broader reduction in demand, keeping overall consumption levels lower for the week.

Transition to Winter Focus Heightens Market Sensitivity

With the arrival of September, the market has shifted its focus from summer storage to winter withdrawal. Storage levels and heating demand will now be key factors in shaping price movements. As of the week ending August 16, the U.S. Energy Information Administration (EIA) reported an increase of 35 billion cubic feet (Bcf) in storage, bringing inventories to 12.6% above the five-year average. This surplus has raised concerns about oversupply as the market prepares for the colder months, adding pressure to futures prices.

Despite some production cutbacks from major natural gas producers like EQT and Coterra Energy, U.S. output remains strong at around 101 Bcf per day. This high level of production, combined with elevated storage levels, has stifled any significant price rallies, as the market struggles to shake off bearish sentiment.

Market Forecast: Bearish Trend Likely to Persist

The near-term outlook for U.S. natural gas futures remains bearish, with $2.252 serving as a crucial resistance level. Failure to break through this level could reinforce the downward trend, pushing prices back toward the $2.021 support level. However, if prices manage to surpass this resistance, a short-term rally could bring futures closer to $2.403. Nevertheless, with strong production and high storage levels looming over the market, any sustained rally faces significant challenges. Traders should remain cautious as oversupply continues to exert downward pressure on prices.