Natural Gas News: Weather-Driven Reversal Top Sends Futures Into Critical Retracement Zone

Natural Gas Futures Retreat After Rally as Traders Eye Critical Support Zone

After surging to a three-week high of $3.065 on Monday, U.S. natural gas futures reversed sharply on Tuesday, falling back into a key technical support zone between $2.880 and $2.836. This area represents the 50% to 61.8% retracement of the recent rally from $2.695 and is expected to determine the near-term direction of the market.

Price action suggests the recent five-day rally was driven more by short-covering than fresh buying, with no confirmation yet of a broader shift in sentiment. With meteorological fall underway and cooling demand expected to weaken, bearish pressure returned as traders reassessed positions ahead of the upcoming holiday weekend.

At 13:11 GMT, Natural Gas Futures are trading $2.884, down $0.113 or -3.77%.

Is Weather Helping or Hurting Natural Gas Demand Right Now?

Weather remains a mixed factor. Atmospheric G2 forecasts early-autumn coolness over the eastern two-thirds of the U.S. through September 6, limiting demand for cooling. Meanwhile, the West Coast is expected to see above-normal temperatures. Vaisala added that cooler-than-normal conditions from North Carolina to Northern California between September 4 and 8 will further dent late-summer air conditioning loads.

These forecasts have weighed on front-month futures, which hit a 9.5-month low early this week. Without a material heat-driven demand spike or hurricane-related supply disruptions, weather may continue to suppress upward price momentum.

EIA Storage Report Fails to Ignite Bullish Momentum

Thursday’s EIA report showed a smaller-than-expected +18 Bcf injection for the week ending August 22, well below the +27 Bcf consensus and the +38 Bcf five-year average. That’s a modestly supportive development, but overall inventory levels remain adequate.

Total storage now stands at 3,217 Bcf, 112 Bcf below year-ago levels but still 154 Bcf above the five-year average. The market is interpreting this as a sign of balance, not shortage, particularly as production remains robust.

Are Supply Levels Keeping a Lid on Prices Despite Fewer Rigs?

Despite a minor dip in active gas rigs—down 3 to 122 last week per Baker Hughes—U.S. production remains near record highs, recently topping 107 Bcf/d. The EIA also revised its production forecast higher, now expecting 106.44 Bcf/d for 2025, up from last month’s 105.9 Bcf/d.

Even with fewer rigs, output continues to exceed demand growth, thanks to improved well productivity and infrastructure. That dynamic makes rallies difficult to sustain without a material change in weather or LNG exports.

Can Bulls Hold the $2.836 Support Zone?

All eyes are now on the $2.880–$2.836 zone. A bounce from this area could attract aggressive buyers attempting to carve out a bullish secondary bottom. A successful defense opens the path toward $3.065, and potentially $3.238 or even the 50-day moving average at $3.300.

Failure to hold this range, however, raises the odds of a drop back to the recent swing low of $2.695.

Forecast: Bearish unless $2.836 holds and attracts fresh buying interest.

More Information in our Economic Calendar.