Natural Gas News: Futures Bounce From Value Zone as September Heat Extends

Natural Gas Bounces Off Value Zone as Heat Extends Into September

Natural gas found buyers where it needed them Monday. October futures dropped to $2.832 in early trading, held just above the 50% retracement level, then rallied back toward the 50-day moving average by late afternoon. The bounce had heat and LNG demand behind it. Both showed up on the same day and the market responded.

At 19:28 GMT, October Nymex natural gas futures are trading at $2.921, up $0.033 or 1.14%. The contract reached $2.947 before pulling back just under the 50-day moving average at $2.923.

Production is running near record levels and rig counts climbed again last week. The demand side held the floor Monday. The supply side is still setting the ceiling.

Daily October Natural Gas Futures Technical Analysis

October natural gas futures are sharply higher late in the session Monday after recovering from early weakness. The 50-day moving average at $2.923 is the immediate resistance level. Overtaking it would put the market in position to challenge the main top at $2.990.

The main trend is up according to the daily swing chart, but conditions have been choppy. A trade through $2.990 will reaffirm the uptrend. The main trend will change to down on a move under $2.668.

The main top at $2.990 and the main bottom at $2.668 have formed a short-term retracement zone at $2.829 to $2.791. Earlier Monday, the market traded down to $2.832 before rebounding. This was close to the upper, or 50% level, of the short-term retracement zone.

That was good price action, in my opinion, because it indicated the current rally is constructive rather than just short-covering, which tends to burn out rallies fast.

Traders should watch the 50-day moving average for the first upside signal. A trade through the main top at $2.990 will be the actual breakout trigger. The next potential upside objective is the intermediate retracement zone at $3.044 to $3.133.

Heat and LNG Are Pulling From the Same Side of the Market

NatGasWeather expects near-record temperatures across the South, East and East Coast through September 5. The 90s and 100s are holding across the major power-generation centers at the point of the year when cooling demand normally starts to fade. Lower-48 gas demand hit 78.4 Bcf per day Monday, up 17.8% from a year ago according to BNEF. Edison Electric reported lower-48 electricity output rose 6.1% year over year for the week ended August 22.

LNG export flows are running just as hard. Net flows to U.S. terminals reached 19.6 Bcf per day Monday, up 15.8% from the prior week. Freeport is back from maintenance and the Gulf Coast is pulling gas for exports at the same time the region’s power plants are burning it for cooling. European storage sat at 64% full as of August 25 against a five-year average of 81%. U.S. cargoes are not losing buyers with that kind of deficit heading into winter.

Last week’s 15 Bcf injection for the week ended August 21 landed well below the 33 Bcf five-year average. Storage stood at 3,184 Bcf, down 1.0% from a year ago but still 5.5% above the five-year seasonal average. The surplus is shrinking. It is not gone. A tropical disturbance near the Gulf Coast could bring rain to Texas and Louisiana this week but is not expected to disrupt production or demand.

Producers Keep Drilling Into the Rally

Lower-48 dry gas production hit 114.6 Bcf per day Monday and touched 115.0 on Sunday. Output is up 5.9% from a year ago. Baker Hughes reported the rig count rose by five last week to 132, a five-month high sitting just below February’s three-year high of 134. Nobody is pulling rigs with Henry Hub below $3.00.

The EIA raised its 2027 production forecast to 116.0 Bcf per day from 115.3 in July. Permian associated gas keeps rising with crude oil output. Haynesville is also climbing. The supply base is growing into a market where every rally has to work through near-record output.

The EIA still expects inventories to reach 3,985 Bcf by the end of October. That would be the highest October storage level in 10 years and about 5% above the five-year average. The demand side won Monday’s session. The supply side is still winning the larger storage math.

What to Watch

Thursday’s EIA report is the next number that matters. The South and East are hot through at least September 5. NOAA’s outlook keeps the heat lingering into early September. The Midwest is less certain after Labor Day. LNG feedgas is at the strongest pull of the year and European storage deficits are not shrinking heading into winter. The demand story holds as long as the weather cooperates and feedgas stays elevated.

Monday’s bounce off the retracement zone near $2.832 was constructive. The 50-day moving average at $2.923 is sitting right on top of the current price. The main top at $2.990 is the breakout trigger. The market needs to get through that level to prove the rally is more than late-summer heat and short-covering.

More Information in our Economic Calendar.