Natural Gas News: Weather and LNG Support September Futures, but Storage Caps Gains

September Gas Holds Support but Storage Won’t Let It Run

September natural gas finished the week higher while August faded, and that split tells you the market sees something worth defending in the active contract even if it cannot get a rally going. LNG demand, power burn and Europe’s storage deficit are all underneath this trade. None of them have been strong enough to overpower a domestic surplus that has killed every bounce this summer. Production is not slowing down, the weather has been hot in the wrong places and until one of those changes, September is stuck between a floor that holds and a ceiling that will not break.

September natural gas futures settled at $2.908, up $0.025 or +0.87%.

Storage Is Still Winning the Argument

The EIA printed a 32 Bcf injection for the week ending July 17 and inventories rose to 3,056 Bcf. That is 183 Bcf above the five-year average and it is the number sellers keep coming back to after every hot forecast fades. The build was smaller than the prior week’s 41 Bcf and that shows power burn is doing some work but one smaller build is not a trend and the surplus has not tightened enough to make anyone uncomfortable on the short side.

Thursday’s report is the next test. A tight number after this week’s heat would be the first real evidence that demand is starting to cut into the cushion. Another normal or above-normal build and the market goes right back to selling the weather rally the way it has all summer.

Texas Heat Is Not Enough and the East Keeps Fading

ERCOT is running heavy summer loads and the interior West is expected to stay above normal into early August. The problem is the Midwest, Great Lakes and Northeast keep getting cooler breaks that pull national demand back from the levels that would actually force covering. The forecasts backed off from earlier in the week and that was enough to take the bid out of Friday’s trade.

Nobody wants to be aggressively short natural gas in late July with a heat dome one weather update away and that is the only reason this market has not broken down already. But one update away is not the same as here and September needs the maps to deliver broad persistent heat before the storage math changes.

LNG Is Holding the Floor Together

Europe at 54% storage against a 70% five-year average and Asia LNG prices at a four-month high on the Hormuz and Red Sea disruptions are keeping the export story alive underneath September. The global market needs U.S. cargoes and that demand is real. Freeport maintenance and uneven Gulf Coast operations have held domestic feedgas flows below their summer highs and that is the part that needs to change before LNG becomes something more than a reason the market has not fallen apart.

Weekly September Natural Gas Technical Analysis

September natural gas futures are in a downtrend according to the weekly swing chart. The market is also on the weak side of the 52-week moving average, reaffirming the downtrend.

A trade through the minor bottom at $2.799 will reaffirm the downtrend. There is no nearby support, so prices could drift lower in the near term if the market breaks through $2.799.

The short-term range is $3.375 to $2.799. Its retracement zone at $3.087 to $3.155 is the next potential upside target. With the main trend down, sellers may even return to defend this zone if tested.

Overcoming the upper end of the zone at $3.155 will indicate that short-covering is getting stronger. If this creates enough upside momentum then look for a possible test of the minor top at $3.326 or the main top at $3.375. Capping the market is the 52-week moving average at $3.567.

What to Watch

The next weather update and Thursday’s storage report decide whether September can build on last week’s gain. Broad heat spreading into the Midwest and Northeast combined with a smaller injection gives buyers the evidence they have been waiting for all summer. Without both, the surplus keeps capping rallies and sellers stay comfortable.

The downtrend is intact on the weekly chart and the market is trading below the 52-week average. A break through the minor bottom resumes the selling with no nearby support below. A rally that gains traction targets the retracement zone overhead but sellers are likely to defend that area with the main trend still pointed lower. September has more support than the nearby month because traders are looking ahead to LNG demand and late-summer weather risk, but storage controls the short-term direction and until the surplus starts shrinking, every rally is on borrowed time.

More Information in our Economic Calendar.