Natural Gas News: Inventory, Weather, and August Expiry Set Stage for Market Volatility

Natural Gas Traders Eye $3 Level as Weather and Supply Pressures Mount

Natural gas futures are treading water near the critical $3 mark, with September contracts edging higher early Tuesday after Monday’s sharp selloff. Traders are closely watching technical support and near-term weather shifts, both of which are driving hesitation and setting the stage for a potential breakout or breakdown.

At 15:38 GMT, Natural Gas futures are trading $3.158, up $0.092 or +3.00%.

Will August Expiry Below $3 Trigger Stop Orders?

August contracts, which expire Tuesday, tested lows of $2.984 before rebounding above $3.080 in early trade. While bulls are attempting to defend key support, the heavy slide of over 60 cents since last week has brought renewed downside risk. Mizuho’s Robert Yawger emphasized the psychological importance of the $3.000 level, warning that a break below could spark stop-driven selling.

September futures traded up around 8 cents at $3.149 early Tuesday but remain within yesterday’s range, signaling indecision. Technically, the main trend is still down, and a drop through $3.062 would confirm a fresh leg lower toward $2.885. If prices rally instead, short-covering could face resistance at the $3.385 pivot, with stronger caps at the 50-day and 200-day moving averages of $3.700 and $3.869, respectively.

How Much Cooling in US Weather Forecasts Will Hit Demand?

Weather-driven demand remains a wild card. NatGasWeather reports strong heat and peak demand early this week, but models show a cooler trend from late this week through early next week, especially across the eastern U.S. Vaisala confirmed that temperatures are expected to ease from August 2–6, prompting Monday’s steep losses. Still, the possibility of renewed heat in the second week of August is giving bulls a reason to stay engaged.

Does Rising US Output Undercut Bullish Sentiment?

Rising U.S. supply is capping upside momentum. Lower-48 dry gas production was 108.6 Bcf/day on Monday, up 4.1% year-over-year, according to BNEF. Baker Hughes also reported an increase of five active rigs last week, bringing the total to a near two-year high of 122. Although domestic demand is up 11.5% y/y and LNG feedgas flows rose to 15.0 Bcf/day, the output gains are limiting upside traction.

Are Inventory Levels Enough to Reinforce Support?

Last week’s EIA injection of 23 Bcf came in lighter than expected, helping to slow the selloff. While inventories are 5.9% above the five-year average, they remain 4.8% below year-ago levels. Meanwhile, European gas storage is lagging at 66% full versus the seasonal norm of 74%, offering some global support.

Market Forecast: Bearish Tilt Unless $3 Holds Firm

With technical momentum still negative and rising production applying steady pressure, the near-term outlook remains bearish unless bulls can decisively defend the $3.000 level. A breakdown below $3.062 would likely open the door to a retest of $2.885, while resistance overhead keeps any rallies in check. Traders should brace for volatility as contracts shift and weather models evolve.

More Information in our Economic Calendar.