Natural Gas News: Bearish Forecast Builds as Market Eyes Breakdown Below $2.574

Natural Gas Drops Below Key Support as Weather Cools and Supply Stays Strong

U.S. natural gas futures closed the week down 7.48%, settling at $2.698, after decisively breaking below long-held support levels. A persistent combination of mild weather, surging production, and elevated inventories continues to weigh heavily on price action. The move not only erased prior gains but also positions the market to test a key long-term support at $2.574, a level not seen in nearly ten months.

Will Cooler Weather Continue to Cap Demand Through Early September?

Forecast models from Atmospheric G2 show a clear cooling trend across major demand regions into early September. Temperatures are expected to dip into the mid-60s to low 80s across the Midwest, Northeast, and Ohio Valley—suppressing power sector demand just as late-summer cooling loads should be peaking.

This softening in demand was already visible last week, with daily gas consumption falling to 77.9 Bcf, despite year-over-year growth. The weakening weather setup continues to strip away any near-term bullish support.

Is Record U.S. Production Keeping Prices Pinned?

Production continues to apply downside pressure. Lower-48 dry gas output hit 108.4 Bcf/day on Friday—up 6.3% year-over-year—according to BloombergNEF. The EIA also revised its 2025 and 2026 production forecasts higher, reinforcing the view that supply remains more than sufficient to meet market needs. With U.S. gas rigs holding at 122, near a two-year high, traders see little risk of meaningful production declines.

Does the Storage Miss Offer Any Real Bullish Relief?

The latest EIA storage report showed a build of just +13 Bcf, far below consensus expectations and well under the five-year average of +35 Bcf. While this initially provided a short-term boost, inventories still sit 5.8% above the seasonal norm, keeping the overall supply picture bearish. Traders are viewing the data as a temporary anomaly rather than a structural change in the storage trend.

Can Technicals Hold the Line at $2.574—or Is Another Leg Down Coming?

The technical setup continues to lean bearish. The breakdown below $2.748 puts $2.574 firmly in play. Bulls may attempt to defend this level, but with the weekly chart still in a strong downtrend and the 52-week moving average far above at $3.721, rallies are expected to face strong selling pressure. The next meaningful upside target is the weekly pivot at $3.198, but any move toward that level is likely to invite renewed selling.

Market Forecast: Bearish Bias Below $2.748

The near-term outlook remains bearish. With prices below $2.748, weather cooling, and production climbing, the path of least resistance points to a test of $2.574. Any bounce is likely to be short-covering and capped below $3.198 unless fundamentals shift decisively. Until then, traders should expect further weakness and continue to sell rallies.

More Information in our Economic Calendar.