Natural Gas News: Market Risks Mount as Bulls Defend Key Retracement Support

Natural Gas Futures Extend Losses as Oversupply and Cooling Weather Pressure Market

U.S. natural gas futures ended the week lower for the second straight time, with the October contract settling at $2.888, down 1.8%. Despite attempts by bulls to stabilize the market, bearish supply data and falling weather-driven demand are driving sentiment, keeping the focus on downside risk heading into the final stretch of September.

Is Rising Supply Still Overpowering Demand Signals?

The latest EIA report confirmed a larger-than-expected inventory build of +90 Bcf for the week ended September 12, outpacing both the +81 Bcf consensus and the five-year average of +74 Bcf. Total storage now stands 6.3% above the seasonal norm, a figure that continues to weigh on prices despite year-over-year inventories being slightly lower.

Meanwhile, production remains firm. Lower-48 dry gas output reached 107.6 Bcf/day on Friday, up 6.1% year-over-year. Active drilling rigs remain near two-year highs, reinforcing expectations of robust supply heading into the heating season. LNG exports continue to offer some relief at 15.3 Bcf/day, but they have not been strong enough to offset softening domestic consumption.

Will Cooling Weather Keep Power Burn in Check?

After weeks of late-season heat supporting prices, forecasts have now turned cooler. Atmospheric G2 projects a drop in temperatures across key demand regions from September 24 through early October. This shift is expected to reduce air conditioning load and lower power sector gas burn.

National demand slipped to 73.1 Bcf/day on Friday, down 4.6% from the same time last year. Although power generation remains marginally supportive on a year-over-year basis, the broader demand picture is softening alongside the seasonal transition.

Are Bulls Building a Base for a Counter-Trend Rally?

Technically, natural gas is testing a critical retracement zone between $2.947 and $2.887—marking the 50% and 61.8% levels of the minor $2.695–$3.198 range. Aggressive bulls are attempting to establish a secondary higher bottom inside this area. If successful, it could trigger a counter-trend rally targeting $3.198, with potential extension toward $3.238—the 50% retracement of the broader $3.780–$2.695 range. Beyond that, $3.598 serves as the next intermediate pivot.

However, if this retracement zone fails to hold, sellers will likely press the market back toward the $2.695–$2.647 support band.

Market Forecast: Bearish Bias Holds, But Upside Reversal Possible on Bullish Defense

The short-term bias remains bearish, anchored by heavy supply and weakening demand. But if buyers can defend $2.947–$2.887 and establish a firm bottom, a short-covering rally into $3.198–$3.238 becomes plausible. Until then, traders should monitor this retracement zone closely—its resolution could dictate the next major move.

More Information in our Economic Calendar.