Natural Gas News: Outlook Turns Bearish Ahead of EIA on Cooler 10-15 Day Forecast

Heat Is Still Here but the 10-15 Day Forecast Turned the Trade

October natural gas futures are falling Thursday with the southern two-thirds of the country still running hot. The heat is not new information. Traders priced it last week. The selling is coming from the 10-15 day outlook where cooling demand drops toward normal to below normal. October futures are heading into the fall shoulder season and the market is pricing the loss of air-conditioning load before it arrives.

The EIA Weekly Natural Gas Storage Report is due at 14:30 GMT. The contract is extending Wednesday’s selloff into the number. The main trend turned down on the daily swing chart after sellers broke through the 50-day moving average and took out the swing bottom.

At 10:32 GMT, October natural gas futures are trading $2.792, down $0.030 or 1.06%. The session high is $2.815. The low is $2.778.

Daily October Natural Gas Futures Technical Analysis

October natural gas is over 1% lower early Thursday after changing its trend to down on the daily swing chart. Today’s selling pressure is a follow-through move, following yesterday’s decisive break to the weak side of the 50-day moving average at $2.876. This indicator is now resistance.

After forming a new swing top at $3.026 on September 3, sellers have dominated the trade. In addition to the breakdown under the 50-day MA, selling pressure was also strong enough to take out the swing bottom at $2.832, turning the main trend down.

The near-term range is $2.668 to $3.026. Sellers also broke through its retracement zone at $2.847 to $2.805, and the market is now trading on the weak side of this zone at $2.805.

The price action suggests that long-liquidation may be taking place. Additionally, the failure at the retracement zone suggests new buyers weren’t too interested either in reentering on the break.

Continued pressure under the 61.8% level at $2.805 could put natural gas in a position to extend the move into the series of swing bottoms at $2.747, $2.685 and $2.668.

On the upside, the trend will change back to up if buyers can take out $3.026, but first they have to recover the 50-day MA before we can even think about a change in trend.

The Front of the Forecast Is Hot but the Back End Is Not

NatGasWeather expects the southern two-thirds of the country to remain very warm to hot during September 9-15 with highs ranging from the upper 80s to 100s. The northern third will generally reach the 60s through 80s with some areas hitting the 90s. Total degree days are expected to stay above normal during roughly the first nine days of the forecast.

After that the picture changes. The southern United States cools several degrees. Comfortable temperatures continue across the North. Total degree days drop toward normal to below normal during days 10-15.

Warmer-than-normal fall temperatures also create a gap in the demand picture. They can reduce cooling demand without generating enough cold to create meaningful heating demand. That leaves natural gas caught between the end of summer air-conditioning load and the start of winter heating season with neither side carrying the market.

Production Running Above August’s Record Pace

Lower-48 dry gas production was 113.5 Bcf per day Wednesday, up 3.9% from a year ago. September production has been running above August’s record monthly pace. The EIA expects U.S. dry gas production to keep growing with output projected to reach another record in 2027.

The market can absorb heavy production when weather demand is strong enough. The forecast is telling traders that cooling demand is about to start falling. Production at these levels with a fading weather bid is the combination that has sellers looking past today’s heat and trading the next two weeks.

EIA Weekly Natural Gas Storage Report at 14:30 GMT

The working expectation is an injection near 35 Bcf for the week ending September 4. Last week’s report showed a 30 Bcf build for the week ending August 28, below the street estimate and below the five-year average of 37 Bcf. The number was bullish. The market reversed from $3.026 and sold off anyway.

Storage stood 5.2% above the five-year seasonal average despite running 1.8% below last year. The EIA expects inventories to finish the injection season around 5% above the five-year average. Last week’s friendly print could not hold the market above $3.00 with the trend still up. The trend is now down. Sellers have more room to work with heading into the next two Thursday reports when cooling demand starts fading from the data.

What to Watch

The EIA storage number at 14:30 GMT is the near-term catalyst. The 10-15 day forecast is the trade. The front of the outlook is still hot but the back end is fading and that is what sellers are positioning around. Production above August’s record monthly pace with cooling demand rolling off is the backdrop for the next several sessions.

The bias has shifted to the downside with the trend now down on the daily swing chart and the 50-day moving average acting as resistance at $2.876. The 61.8% level at $2.805 is where the market is sitting right now. A sustained break below opens the series of swing bottoms at $2.747, $2.685, and $2.668. Buyers have to recover the 50-day moving average before the trend can even begin to change. Until then, sellers remain in control.

More Information in our October natural gas.