Natural Gas Forecast: $3 Resistance Holds as Demand Improves

Natural Gas Technical Analysis

The natural gas market has initially gapped lower to kick off the week on Monday in what will probably be thin trading, as it is Labor Day in the United States.

Nonetheless, we rallied initially, slamming into the $3 level before pulling back. There’s a lot going on in natural gas at the moment, and some of the constructive factors that are starting to come into play include strong electricity demand, especially in Texas, whose grid has been near record-level load as of late.

Liquefied natural gas exports are starting to really make a difference as well. We’re up 23% year over year in the United States. And that’s a trend that’s expected to continue. You’re talking basically 17 and a half billion cubic feet per day on average. That’s huge.

The EIA expects third-quarter LNG exports to be around 16 and a half billion cubic feet a day. So pretty strong constant demand.

Massive Amount of Supply in the United States

Now, the biggest problem, of course, is that there is a massive amount of supply in the United States sitting in storage tanks. It still hasn’t really dented it. So, while it’s a little elevated, the reality is it has a lot of work to do.

Really, what natural gas bowls will need is cold weather. That’s generally the story here.

Anyways, we’re approaching the shoulder season, which is when it’s not going to be super hot. It’s not going to be super cold. So, demand really falls off of a cliff. That will keep this somewhat sideways and put a little bit of a lid on that European and Asian demand story.

Nonetheless, we will, as we roll forward, we’re in the October contract now in the market for the futures market, start to see more heating demand priced in. So, I have switched my view from being bearish and neutral as of late, and that is playing out technically speaking as well.

The 50-day EMA at $2.88 has offered support over the last four or five sessions. I see support at $2.80 as well. $3 is an obvious resistance area. It looks like it holds up to about $3.05.

So, a range is what I’ll be looking for here.

If you’d like to know more about how to trade natural gas, please visit our educational area.