Natural Gas News: Trend Reversal Hinges on $3.489 as Market Grapples With Oversupply

Natural Gas Posts Weekly Gain but Strong Supply and Weak Demand Cap Upside

U.S. natural gas futures closed the week higher, but the move lacked fundamental conviction as short-covering and end-of-month positioning appeared to drive the bounce. Despite the technical reversal, the market remains constrained by oversupply, soft demand, and limited weather support, with traders skeptical of any sustained upside unless fresh catalysts emerge.

Last week, U.S. natural gas futures settled at $3.206, up $0.027 or +0.85%.

Is Short-Covering Behind the Latest Bounce?

Last week’s minor upside reversal appears to have been fueled more by short-covering than a shift in underlying fundamentals. Support held in the $2.986–$2.938 zone, a key area combining both short- and long-term bottoms. The ability to defend this range helped stabilize prices, but there’s no evidence yet of trend reversal on fundamentals alone.

The broader downtrend remains intact unless the market can clear a weekly swing top at $3.489. That level is the trigger for a trend change on the weekly chart and would likely require a notable supply disruption or demand surge to materialize. Until then, rallies are likely to face selling pressure.

Storage and Production Remain Bearish Anchors

The latest EIA report showed a +75 Bcf injection for the week ending September 19, right in line with expectations and slightly under the five-year average. Still, inventories sit 6.1% above seasonal norms, reinforcing the bearish bias. U.S. stockpiles are also 0.5% above last year’s levels, underscoring comfortable supply entering October.

Lower-48 dry gas output averaged 107.7 Bcf/day last week, up 6.8% from a year ago. Drilling activity remains strong, with 117 active rigs. LNG exports held near 15.8 Bcf/day, offering steady but not tightening support. Europe’s storage sits at 82% capacity—adequate, though lower than last year’s 89% at this time.

Weak Weather-Driven Demand Limits Near-Term Upside

Weather forecasts continue to limit bullish potential. Mild conditions are expected across most of the U.S. through October 10, curbing both cooling and early heating demand. National consumption remains classified as “low to very low,” with power burn offering only marginal support. While electricity output rose 2.3% y/y last week, it’s not enough to materially tighten balances.

Market Forecast: Neutral to Bearish Below Weekly Trend Reversal Level

The market is holding key weekly support at $2.938, but without a break above $3.489—the weekly swing top—the broader trend remains down. If the breakout over $3.489 creates enough upside momentum, the 52-week moving average at $4.058 will hit the radar.

Fundamentals offer little reason for sustained upside, and any rallies are likely to face selling pressure. Traders should view the recent bounce as technical in nature unless accompanied by stronger demand or supply disruptions.

More Information in our Economic Calendar.