Natural Gas News: Forecast Weakens With Inventory Glut Pressuring Market Today

Can Natural Gas Hold After Breaking Multi-Month Lows?

U.S. natural gas futures sank sharply Wednesday, breaking below Monday’s multi-month low at $3.275, with the technical picture hinting at further downside toward $2.885.

An abundance of supply, tempered weather forecasts, and choppy LNG exports are keeping sellers firmly in control, forcing traders to assess whether near-term support will hold.

Will Storage Surpluses and LNG Keep Bears in Control?

Ample storage continues to weigh on bulls, with the latest EIA data showing U.S. inventories up 6.2% above the five-year average, despite being down 5.8% year-over-year.

The latest injection of +55 Bcf surpassed consensus, reinforcing the market’s view that supply is not a constraint.

Eli Rubin at EBW Analytics noted that the combination of “lofty storage surpluses and weak Henry Hub spot realizations” may keep bears in charge, especially given uneven LNG flows, which fell 2.5% week-over-week to 15 Bcf/day on Tuesday.

Lower-48 dry gas production remains robust at 104.8 Bcf/day, up 3.9% year-over-year, while demand fell 6.8% to 77.9 Bcf/day, underscoring the imbalance pressing prices lower.

How Are Weather and Wind Generation Influencing Demand?

NatGasWeather highlighted strong heat for July 7-13, with highs in the mid-80s to 90s across much of the U.S., including 100s in the West and Plains, supporting high near-term demand.

However, forecasts have cooled for the central U.S. for July 13-17 and for the East July 18-22, pressuring futures lower on expectations of reduced power burn for air conditioning.

Additionally, light wind energy generation could support near-term gas demand, but overall the demand outlook is less aggressive than traders had anticipated earlier.

Can Technical Levels Trigger a Short-Covering Bounce?

Technically, traders remain cautious about bottom-picking due to downside exposure, with a potential sharp reversal needed to flush out shorts for a durable floor to form.

A close above $3.574 would indicate intensifying short-covering, while resistance near the 50-day and 200-day cluster ($3.793-$3.800) is likely to attract renewed selling.

August Nymex gas futures on Tuesday closed down 2.11% at $3.35, reinforcing a downtrend as technical sellers remain active.

Market Forecast

Given elevated storage, resilient production, tempered weather forecasts, and technical weakness below $3.275, the near-term outlook for U.S. natural gas remains bearish, with traders eyeing the $2.885 level as the next significant support.

Unless a sharp reversal above $3.574 materializes on high volume, rallies are expected to encounter resistance, keeping sellers in control while high storage and cautious demand expectations persist.

More Information in our Economic Calendar.