Natural Gas News: Heat and LNG Demand Put Bulls Back in Control

Nine Sessions Above the 50-Day and LNG Just Hit a Two-Month High

August natural gas settled up 9.4 cents or 2.96% Tuesday after bouncing off the 50-day moving average for the ninth consecutive session. The market dropped to a one-and-a-half-week low earlier in the day and buyers came right back. That pattern has been repeating since mid-June and every test of the 50-day has produced the same result. The selling runs into a floor and the buying resumes.

Two forces drove Tuesday’s recovery. LNG feedgas flows hit 19.7 Bcf per day according to BloombergNEF, the highest level in more than two months. NatGasWeather classified national demand as high to very high over the next seven days on above-normal temperatures stretching across the eastern two-thirds of the country through July 4. The market had two reasons to buy Tuesday and it acted on both of them.

19.7 Bcf Per Day Is the Highest LNG Flow in Two Months

LNG feedgas deliveries to U.S. export terminals reached 19.7 Bcf per day Tuesday. That is the strongest reading since late April and it arrives at a time when the domestic market is already tightening on summer heat. Every Bcf flowing to an export terminal does not go into storage and at nearly 20 Bcf per day the pull on domestic supply is running at a pace that offsets a significant portion of the production growth.

Qatar’s Ras Laffan complex is still damaged. Repairs are expected to take years. That facility handles roughly one-fifth of global LNG production and the longer it stays offline the more international buyers depend on U.S. cargoes. European storage is at 49% full against a 63% five-year seasonal average. That gap keeps the pull on U.S. exports strong through the summer and into the fall.

The Heat Forecast Held and Power Demand Is Following

Above-normal temperatures across major eastern population centers are expected to persist through at least July 4. Highs in the 80s, 90s, and low 100s are keeping air conditioning load elevated and power generators are burning more gas to meet it. The western United States is running cooler with periods of showers but the eastern two-thirds of the country is where the electricity demand lives.

Edison Electric Institute reported weekly electricity generation declined 2.17% from a year ago in the latest week. The trailing 52-week average is still running 2.45% above last year. One cool week pulled the comparison lower. The heat building through early July should reverse that quickly.

Production at 112.2 Bcf Per Day Is the Ceiling the Bulls Have to Push Through

Lower-48 dry gas production was estimated at 112.2 Bcf per day Tuesday, up 2.9% from a year ago.The EIA raised its 2026 forecast to 111.0 Bcf per day. Baker Hughes reported the rig count increased by three to 125 last week. The supply side is not backing off.

Production at this level is the reason the market has not broken through resistance despite nine sessions above the 50-day. Weather and LNG demand are absorbing the output but not outpacing it consistently enough to force the breakout. The bulls need the heat to intensify or LNG flows to climb further before the supply ceiling gives way.

Storage Is Above the Five-Year Average but Below Last Year

The last EIA report showed a 76 Bcf injection that exceeded expectations and the five-year average. Total storage sits 5.7% above the five-year seasonal norm and 2.2% below last year. The bears point to the surplus over the five-year average. The bulls point to the year-over-year deficit that has been narrowing since spring.

Both arguments have merit and neither one is winning the daily trade. Weather and LNG are deciding the sessions. Storage is deciding the ceiling. As long as injections keep coming in near or above the five-year average, the surplus holds and rallies get capped. If the heat and LNG demand start pulling injections below the average, the ceiling moves higher.

Daily August Natural Gas Technical Analysis

August natural gas futures settled higher on Tuesday after a successful test of the 50-day moving average at $3.184. The move created enough upside momentum to overcome a pair of 50% levels at $3.196 and $3.239.

Nine sessions on the strong side of the 50-day moving average indicates the presence of buyers, who are waiting for a catalyst to drive the market through the pair of main tops at $3.377 and $3.418.

That’s just the first part of the rally. The second part will be a breakout over the intermediate pivot at $3.465. This is the trigger point that can launch an acceleration into the 200-day moving average at $3.621 and the long-term 50% level at $3.700.

If the weather fails to cooperate, prices could retreat pretty quickly to the weak side of the 50-day moving average at $3.184. If this creates enough downside momentum then look for the market to possibly extend losses into $3.059 to $2.974 over the near-term.

What to Watch

LNG at 19.7 Bcf per day and heat classified as high to very high through July 4. Those are the two forces that produced Tuesday’s 2.96% gain and both remain in place heading into Wednesday. The 50-day has held for nine sessions and the market overcame both 50% levels on Tuesday’s rally. The resistance overhead at the two main tops is the next test.

Production at 112.2 Bcf per day is the constant the demand side has to outgrow. Nine sessions of trying has not produced a breakout. The heat forecast holding through the holiday and LNG flows staying near 20 Bcf per day is the combination that gives the bulls the best chance of breaking through. If the weather models cool or LNG flows pull back, the 50-day that has been holding all month gets tested again and a failure there opens the downside support.

More Information in our Economic Calendar.