Natural Gas News: Bearish Outlook Builds as Weather Cools, Inventory Swells

Natural Gas Plunges 8.8% as Cooler Forecasts Derail Summer Demand Expectations

Natural gas prices came under heavy selling pressure during the holiday-shortened week of June 30 to July 4, with futures settling 8.8% lower as cooler weather forecasts undercut expectations for strong summer demand, while robust production and solid storage builds reinforced the bearish narrative.

Will Weather Forecasts Continue to Undermine Natural Gas Bulls

Traders who positioned for heat-driven demand faced a sharp reversal as forecasts shifted cooler across key regions, reducing expectations for air conditioning load into mid-July.

Models from ECMWF projected lower Cooling Degree Days for the 10-15 day window, signaling weaker demand from power providers in the Midwest and South.

The initial bullish outlook, with expectations of 80s to 100s across East Coast cities, was replaced by forecasts of showers and temperatures in the 70s-80s, directly impacting regions that typically drive peak summer natural gas consumption.

Is Production Strength Still Outpacing Demand

Lower-48 dry gas production remained a key bearish factor, hitting highs of 107.4 Bcf/d, up 3.7% year-on-year, even as rig counts dipped from 114 to 109.

Demand struggled to keep pace, with readings ranging from 74.0 to 76.7 Bcf/d, creating a daily surplus of 30+ Bcf/d that pressured spot and futures prices.

The persistent imbalance underscores the difficulty for bulls without a meaningful weather-driven demand spike or a production slowdown.

How Do EIA Storage Builds Confirm Bearish Supply Conditions

EIA storage data confirmed market oversupply, with a +96 Bcf injection for the week ended June 20, well above the +88 Bcf consensus and the +79 Bcf five-year average.

The following week showed a +55 Bcf build, exceeding expectations of +49 Bcf despite falling below the five-year average.

These strong injections during peak demand season highlight production growth outpacing incremental summer cooling demand, with inventories now sitting 6.2% above the five-year seasonal average, creating resistance to any price rally attempts.

Can LNG Exports and Geopolitical Factors Provide a Floor

LNG feed gas flows between 14.7 and 15.8 Bcf/d provided steady demand support, but export growth proved insufficient to absorb the mounting supply surplus.

While LNG flows showed weekly gains of 6.8% to 9.3% in some periods, the pace of increase couldn’t offset the 30+ Bcf/d daily production surplus.

Easing geopolitical tensions, including Israel-Iran ceasefire signals, further reduced risk premiums, eliminating a potential bullish catalyst from the complex.

Market Forecast: Bearish Pressure Likely to Persist

Given the cooler forecasts, strong production, and comfortable storage levels, natural gas prices are likely to remain under pressure in the near term.

Bulls will need a clear demand catalyst or a production slowdown to alter this backdrop, which currently favors sellers.

The holiday-shortened trading week may have amplified the selling pressure, but the underlying fundamental weakness suggests continued vulnerability.

Technically, U.S. natural gas futures are trading on the weakside of its 52-week moving average at $3.640. This is a bearish sign. The indicator is now both resistance and a potential trigger point for an acceleration to the upside.

On the downside, the weekly charts shows no meaningful support until $2.496. Given the downtrend, a breakout over $3.640 will probably be fueled by short-covering, which means a drive into the long-term pivot at $4.047 is likely to be sold.

More Information in our Economic Calendar.