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Natural Gas News: Can Natural Gas Futures Break Resistance to Hit 50-Day Moving Average?
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Key Points:
- Natural gas futures rallied 1.80% Friday but still ended August down 5.73% after hitting a 9.5-month low earlier in the week.
- A bullish EIA report showed inventories rose only 18 Bcf, well below the 5-year average build of 38 Bcf for this time of year.
- Traders eye $3.238 resistance as natural gas futures test key technical levels, with $3.300 marking the 50-day moving average.
Natural Gas Snaps Back After Heavy August Selloff
U.S. natural gas futures closed out August down 5.73%, marking a significant monthly loss driven by bearish weather forecasts and surging supply. But after hitting a 9.5-month low earlier in the week, prices rallied sharply to close Friday at $2.997, up 1.80% on the day and logging four straight sessions of gains. The late-month rebound, while technically encouraging, follows a broader downtrend that still weighs on sentiment.
Are Tightening EIA Builds Enough to Support the Bounce?
Thursday’s EIA report delivered the first bullish surprise in weeks. U.S. natural gas inventories rose just 18 Bcf for the week ending August 22, well under the expected 27 Bcf and far below the five-year average of 38 Bcf. Storage is now 3.5% below last year’s level, although still 5% above the five-year seasonal norm. The market responded immediately to the tighter-than-expected build, helping to fuel Friday’s price surge.
Weather Remains a Key Swing Factor for Demand
Traders are weighing a mixed weather outlook. Atmospheric G2 forecasts early-autumn coolness across the eastern U.S., while the West faces a period of hotter-than-normal temperatures through early September. But Vaisala projects broader below-normal temperatures from North Carolina to Northern California from September 4–8, which could undercut late-summer demand. That’s a risk for bulls betting on a sustained rally.
Production Still Pressuring the Supply Side Equation
Even with storage tightening, output continues to limit upside. U.S. dry gas production hit 107.4 Bcf/day on Friday—up 3.8% year-over-year—while demand from the lower-48 states dropped 11.9% to 71.7 Bcf/day. LNG feedgas flows slipped 1.9% week-over-week to 15.6 Bcf/day. Meanwhile, Baker Hughes reported a net decline in U.S. gas rigs to 122, down from a recent 2-year high, but the broader trend remains one of historically strong output.
Will Resistance at $3.238 – $3.300 Stall the Rally?
With prices now trading above $2.922, the market has cleared a critical technical hurdle. The next swing top is at $3.039, followed by $3.221. However, the major resistance—and trend indicator—sits at $3.238. A break above this level could open the door to the 50-day moving average at $3.300. If momentum stalls, traders may look for a pullback toward the 50% retracement of the recent rally, near $2.859.
Market Forecast: Cautiously Bullish Short-Term
Despite August’s clear downside, tightening storage data and a strong technical bounce shift the near-term outlook to cautiously bullish. Still, production remains a headwind, and demand concerns tied to cooler weather could cap gains unless bulls push decisively through $3.238. Traders should stay alert for signs of exhaustion or confirmation of a breakout.
More Information in our Economic Calendar.
About the Author
James Hyerczykauthor
James Hyerczyk is a U.S. based seasoned technical analyst and educator with over 40 years of experience in market analysis and trading, specializing in chart patterns and price movement. He is the author of two books on technical analysis and has a background in both futures and stock markets.
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