Natural Gas News: Futures Spike 6% as Weather Forecast Ignites Market

 June Natural Gas Surges 6% as Heat Forecasts, LNG Risk and Short Covering Hit at Once

June natural gas futures are up nearly 6% Monday and approaching $2.91 per MMBtu on the New York Mercantile Exchange. Three things hit the market at the same time. Trump rejected Iran’s latest proposal and the Strait of Hormuz risk premium jumped. Weather models flipped hotter across the southern U.S. And the short sellers who loaded up expecting a weak shoulder season got caught. When those three things land in the same session, the move is not gradual. It is fast and it is what happened Monday.

Technical Outlook

June natural gas futures rallied sharply higher on Monday after opening on the strong side of the short-term pivot at $2.749. The market rallied through former tops at $2.883 and $2.905 while reaching for an intraday high at $2.928. The move puts it within striking distance of the 50-day moving average at $2.966.

The 50-day MA will be a critical test for natural gas traders because it can be resistance and the trigger point for an acceleration to the upside.

The intermediate range is $3.622 to $2.592. If buyers can take out the 50-day MA with conviction then look for the surge to continue into the 50% level at $3.107.

The main range is $4.218 to $2.592. Its 50% level target is $3.405. It forms a potential resistance cluster with the 200-day MA at $3.458.

This rally is likely being fueled by a combination of mostly short-covering and aggressive buying. But without a major shift in the demand numbers, sellers are likely to pounce on this move as it nears critical resistance areas.

The Strait of Hormuz Flipped the Global LNG Picture

Trump rejected Iran’s proposal and the overseas market did not wait around. European TTF natural gas futures jumped nearly 6% on the same session. That is not a coincidence. The Strait of Hormuz is not just an oil choke point. When that waterway is under threat, global LNG supply gets repriced fast and U.S. export terminals are the first place overseas buyers look for replacement supply. Those facilities are already running near capacity. The risk premium that had been bleeding out of this market came back in one session and domestic prices followed.

Weather Models Flipped and the Bulls Got What They Needed

The southern United States is looking at widespread 90s over the coming weeks with some areas pushing toward triple digits. That is not a shoulder season forecast. That is an early summer demand story and it arrived faster than most traders were positioned for. Natural gas powers the air conditioning load across the Sunbelt and when that load hits in May instead of June, the storage builds that bears were counting on start shrinking. Traders who came into the week short had to make a decision fast and most of them made it on the way up.

Production Is Starting to Loosen the Bears’ Grip

129 active natural gas rigs. That is where the count sits after producers pulled back drilling when prices were too low to justify the spend. Lower rigs mean softer output down the road and the numbers are already starting to show it. Dry gas production has come in below earlier forecasts and the oversupply story that dominated the first quarter is not as airtight as it was. The Waha Hub is still in negative territory because Permian bottlenecks are trapping associated gas in West Texas. That is a local problem. The national picture is tightening and that is the one June natural gas futures are trading.

Storage Is Setting Up for a Bullish Print

The next Energy Information Administration report is expected near 79 Bcf. Last year the same week saw 109 Bcf. The five-year average is 84 Bcf. Seventy-nine against eighty-four with last year at 109 is a significant gap and it is showing up this early in the season because LNG exports are pulling hard and weather demand arrived ahead of schedule. Three months ago this market was pricing in surpluses all year. That story is cracking and Monday was the first session where enough traders admitted it at the same time.

What I’m Watching

The 50-day moving average at $2.966 is where this rally gets tested. June natural gas futures made a hard run at it Monday but hard runs and clean breaks are different things. Sellers know that level and they will be there. Push through $2.966 with real buying behind it and $3.107 opens up. Stall there and Monday starts looking like a short-covering event that ran out of fuel at resistance. The weather and LNG stories are legitimate. They just need follow-through buying to confirm it. This week tells me which version this is.

More Information in our Economic Calendar.