Natural Gas News: Futures Slide as Weather Fails to Offset Inventory Glut

June Natural Gas Takes Over and the Bears Are Already in Control

May Nymex Natural Gas expired Tuesday and June futures stepped in and immediately went lower. That transition told you everything about where this market stands. Weather gave the bulls a window early in the session and they couldn’t hold it. Supply closed the door fast.

Technical Outlook

At 10:26 GMT, June natural gas futures are trading $2.665, down $0.026 or -0.97%. The weak price action has put the market in a position to challenge the multi-month low at $2.649, reached last Friday. Taking out this level could create the downside momentum needed to challenge additional multi-month lows at $2.564 and $2.442.

The intermediate and long-term trends are decisively lower with the 50-day moving average at $3.013 and the 200-day moving average at $3.503, providing direction and resistance.

The near-term range is $2.905 to $2.649. Its pivot at $2.777 and the minor swing top at $2.808 are resistance. Overcoming both levels will shift momentum. Taking out the swing top at $2.905 will mean the short-covering is getting stronger.

Any rally from current price levels is very likely to be short-covering. At first glance, the formation tells me that it’s going to take a sustained move over the 50-day MA to get anyone excited about the upside.

Weather Gave Bulls an Opening, Supply Slammed It Shut

Below-normal temperatures across most of the country through early May handed the bulls something to work with. Late-season cold can extend heating demand and in a thin demand period that is enough to move the May contract higher into settlement. I watched it play out Tuesday. May closed modestly higher. June went the other direction. That spread tells you where the real conviction is.

The cold does not change the supply picture and traders know it. This market is heading into the dead zone for demand. Winter heating is done. Summer cooling is weeks away. A cold snap in early May is noise against that backdrop and the June contract priced it that way immediately.

Storage Is the Problem and Production Is Making It Worse

U.S. natural gas inventories are more than 7% above the five-year average right now. The Energy Information Administration reported a 103 billion cubic feet build last week, well above expectations and well above the seasonal norm. That is not a number that invites buyers in.

Production is sitting near record highs around 110 billion cubic feet per day. I keep coming back to that number because it doesn’t move. The rig count has been grinding higher for a year and a half and the Energy Information Administration already raised its production forecast on top of that. There is no supply story that favors the bulls here.

The Global Side Is Not Enough

Qatar LNG damage and Strait of Hormuz constraints are tightening international supply and that is a real factor for U.S. export demand over time. Electricity generation trending higher adds something on the demand side too. I’m watching both. The problem is the market is not treating either one as a reason to buy June futures right now. Domestic storage and production are too heavy and every rally is getting sold.

What I’m Watching

Every bounce in June Nymex Natural Gas is a selling opportunity until something changes on production or storage. A cold pattern that runs longer than expected could buy the bulls some time. A meaningful surge in exports could shift the picture. Neither one is showing up yet and until one of them does, this market stays heavy.

More Information in our Economic Calendar.