Natural Gas News: Heatwaves Loom but Market Pressured by Strong Supply, Inventory

Natural Gas Futures Test Support as Heat Risks Clash with Strong Supply

U.S. natural gas futures are sliding at the start of the week, with traders watching closely as prices approach key technical support at $2.972. A sustained break below this level could open the door for further downside toward the longer-term support at $2.885. Despite forecasts for stronger heat in the coming weeks, supply fundamentals remain the dominant market driver, pressuring prices.

At 12:54 GMT, Natural Gas futures are trading $3.023, down $0.060 or -1.95%.

Is Weather Risk Enough to Lift Prices off Technical Lows?

Weather-driven demand remains limited in the near term. NatGasWeather reported that national demand will stay light through Wednesday due to mild temperatures across much of the country, with highs ranging from the 70s to lower 80s. Only the South and California are expected to see stronger cooling demand. However, heat is expected to intensify from Friday through August 17, as upper high pressure builds and temperatures reach the upper 80s to 100s across much of the U.S.

While the weather models support stronger power burn demand in the medium term, current trading action shows the market is not pricing in those risks just yet, suggesting skepticism about the durability of this heat pattern.

Robust Supply and Output Trends Weigh on Sentiment

Friday’s sell-off highlighted broader concerns about supply outpacing demand. Lower-48 state dry gas production reached 108.1 Bcf/day on Friday, up 3.4% year-over-year, while demand stood at just 76.1 Bcf/day—down 13% year-over-year. U.S. LNG export volumes offered some relief, rising to 15.2 Bcf/day, but this was not enough to offset the bearish production/demand imbalance.

Additionally, Baker Hughes reported an increase of two active gas rigs last week, bringing the total to 124—the highest level in two years. That confirms growing upstream confidence and signals continued production growth.

Storage and EIA Data Confirm Bearish Tone

Thursday’s EIA report added pressure after showing a +48 Bcf injection for the week ended July 25—above the consensus of +41 Bcf and nearly double the 5-year average of +24 Bcf. Inventories are now 6.7% above the five-year norm, despite being 3.9% below year-ago levels. Traders also took note of higher-than-expected electricity output, up 8.1% year-over-year, but this failed to offset the weight of rising inventories and production.

Market Forecast: Bearish Bias Remains Below $3.131

With the main trend down and momentum favoring sellers, natural gas futures are vulnerable to further downside unless prices can reclaim $3.131 to trigger a minor uptrend. Until then, rallies will likely stall near the $3.340 pivot. The path of least resistance remains lower, with traders eyeing $2.972 as the next decision point and $2.885 as a deeper support target if bearish pressure persists.

More Information in our Economic Calendar.