Natural Gas Futures Slip Below $3 Ahead of Storage Report
October natural gas futures reached $3.076 early Thursday and could not stay there. Buyers pushed the contract through the $3.026 swing top Wednesday and tried to extend Thursday morning.
The move ran into selling inside the retracement zone and October dropped back under $3.000 before the EIA storage report. The estimate is near 50 bcf for the week ended September 18. The five-year average build for the week is 76 bcf. The market already priced the light number. Thursday’s fade says the report has to beat the estimate to keep buyers interested.
At 12:32 GMT, October natural gas futures are trading $2.998, down $0.025 or -0.83%. The session high is $3.076 and the low is $2.986. At 12:33 GMT, November natural gas futures are trading $3.139, down $0.014 or -0.44%. The session high is $3.210 and the low is $3.132.
Daily October Natural Gas Technical Analysis
October natural gas futures are trading lower Thursday after reaching $3.076 early in the session. The main trend is up according to the daily swing chart after the contract took out the $3.026 main top. A trade through $3.076 will signal a resumption of the uptrend. A move through the new main bottom at $2.817 will change the main trend to down.
The October contract is trading above its 50-day moving average at $2.854. That average and the $2.817 to $2.805 support area are the first downside cluster if the current break continues.
On the upside, the contract is trading inside the major retracement zone at $3.044 to $3.133. The $3.076 high is inside that area. This is where the buyers have to keep taking offers if they want to make a run at the $3.133 level. A failure to hold $3.044 puts the recent breakout back into question.
The larger range is $3.420 to $2.668. The $3.044 to $3.133 zone is the 50% to 61.8% retracement area of that break. A sustained move over $3.133 puts the $3.420 main top back in play. The 200-day moving average at $3.296 is sitting between those two levels.
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See all Natural Gas forecastsDaily November Natural Gas Technical Analysis
November natural gas futures are pulling back Thursday after reaching $3.223. The main trend is up according to the daily swing chart after the contract took out the $3.150 main top. A trade through $3.223 will signal a resumption of the uptrend. A move through the main bottom at $2.976 will change the main trend to down.
The contract is above the 50-day moving average at $3.034, but it is still below the 200-day moving average at $3.529. The 50-day is the first moving-average support if the current selling continues.
The new main range is $2.976 to $3.223. Its retracement zone is $3.129 to $3.070. Trader reaction to this zone will tell us if buyers are still willing to support the breakout or if the move through $3.150 pulled in buyers who are already getting out.
On the upside, November is testing a series of retracement levels at $3.216, $3.264, $3.291 and $3.350. The contract reached $3.223 and backed off. Buyers have to take out $3.223 first, then the $3.264 to $3.291 area, before the market can make a serious run at $3.350.
A Light Build Is Already Priced
Surveys are running from 50 bcf to 53 bcf for Thursday’s EIA report. Last week’s 44 bcf build came in below the 48 bcf estimate and well below the five-year average of 74 bcf. Inventories as of September 11 were 3.7% above the five-year seasonal average and 3.9% below a year ago.
Wednesday’s rally happened on the shrinking surplus story. Traders pushed October natural gas futures to their best level in about two and a half months. Thursday’s early move to $3.076 showed buyers still wanted to own it. The break from that high shows they are not willing to keep taking offers before the number hits. The two-day rally needs a build below 50 bcf to hold together.
The Weather Turned and Demand Is Falling With It
Commodity Weather Group sees normal seasonal conditions across most of the country from September 28 through October 2. NatGasWeather has low demand over the next seven days with bearish patterns over the next 15 to 20 days.
Lower-48 gas demand was 74.0 bcf per day Wednesday, down 4.9% from a year earlier according to BNEF. Production was 112.1 bcf per day, up 2.9% from a year ago according to BNEF. Output fell about 4 bcf per day from the prior week but the base is still running well above last year. LNG flows to U.S. export terminals were 18.5 bcf per day, down 0.9% from the prior week. Demand falling, production elevated, exports flat. That is the balance sheet the EIA report drops into Thursday afternoon.
The Supply Numbers Keep the Ceiling Low
The EIA projected end-of-October storage near 3,985 bcf. That would be the highest in a decade and 5% above the five-year average. The EIA also raised its 2027 dry natural gas production forecast to 116.0 bcf per day from 115.3 bcf per day in July. More gas next year on top of a storage number that is already running ahead of normal.
Baker Hughes reported 134 active natural gas rigs in the week ended September 18. This matched the three-year high from February. The rig count is not showing a drilling pullback. The rig count, the production forecast, and the El Niño outlook are all sitting on top of a two-day rally that started on one light storage build.
What to Watch
The EIA report drops into a market that already faded from $3.076 to below $3.000 on the estimate alone. The two-day rally started on one light storage build and a hotter late-summer forecast. Commodity Weather Group and NatGasWeather have both shifted cooler since Wednesday. Lower-48 gas demand is down 4.9% from a year ago according to BNEF. The rally has the storage drawdown and nothing else right now.
October natural gas futures need to regain $3.044 after Thursday’s break. November natural gas futures need to hold above the $3.129 to $3.070 retracement zone. The main trends are up on both contracts. The momentum faded before the report. A build below 50 bcf is what keeps the breakout trade alive heading into the weekend.
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