Natural Gas News: Weather Holds the Floor as Inventories Cap Rallies

Natural Gas Edged Lower Friday but Sellers Could Not Force a Breakdown

October natural gas futures edged lower Friday and finished inside the previous session’s range below the 50-day moving average. The trend is down. Sellers have been in control since the swing bottom broke earlier in the week. They have not been able to extend the move. Friday’s inside bar left the next direction to the weekend weather models.

The EIA Weekly Natural Gas Storage Report came in at 40 Bcf Thursday, above the 34 Bcf forecast. Warm weather across the South and Southeast and LNG feedgas near 19.8 Bcf per day kept sellers from running away with it.

October Nymex natural gas futures lost $0.003 or 0.11% on Friday. The market closed below the 50-day moving average at $2.871.

Daily October Natural Gas Futures Technical Analysis

October natural gas futures finished slightly lower on Friday after posting an inside move. The main trend is down according to the daily swing chart. A trade through $2.753 will signal a resumption of the downtrend. Taking out the main top at $3.026 will change the trend to up.

The market also finished on the weak side of the 50-day moving average at $2.871, which is helping to support the downside bias.

The short-term range is $2.668 to $3.026. The market closed inside its retracement zone at $2.847 to $2.805. Overtaking the upper level could fuel a short-covering rally, while a sustained move under $2.805 will signal renewed selling pressure.

The near-term range is $3.026 to $2.753. Its retracement zone at $2.890 to $2.922 is potential resistance.

Taking out $2.753 supports the downside case with potential targets at a string of main bottoms at $2.747, $2.685, and $2.668.

Recovering the 50-day moving average at $2.871 weakens the bearish setup, but sellers are likely to defend against a change in trend on a test of $2.890 to $2.922.

Thursday’s 40 Bcf Build Came in Above the Street

The EIA reported a 40 Bcf injection for the week ended September 4, exceeding the 34 Bcf forecast. The build was smaller than the five-year average increase of 52 Bcf. Total inventories stood 4.8% above the five-year seasonal average. Supplies were 2.7% below last year.

The EIA projected on August 11 that storage will reach 3,985 Bcf by the end of October. That would be the highest end-of-season total in 10 years and about 5% above the five-year average.

Production Hit 113.8 Bcf and Rigs Climbed Again

Lower-48 dry gas output reached 113.8 Bcf per day on Friday, up 4.4% from a year earlier. The Energy Information Administration raised its 2027 dry natural gas production forecast to 116.0 Bcf per day from the 115.3 Bcf projected in July.

Baker Hughes reported active U.S. natural gas rigs increased by two to 132 during the week ended September 11. That left the count just below the three-year high of 134 reached in February. Rigs climbing with the front month below $3.00 and the trend already down.

South and Southeast Heat Kept Sellers From Extending

Commodity Weather Group expects above-average temperatures across the South and Southeast through September 20. Lower-48 gas demand reached 75.8 Bcf per day on Friday, up 7.5% from a year earlier. Air-conditioning demand is still elevated.

The Edison Electric Institute reported lower-48 electricity output increased 19.69% year over year during the week ended September 5 to 100,302 gigawatt hours. The 52-week total through September 5 climbed 3.00% to 4,392,478 gigawatt hours.

Forecasters expect a Super El Niño to produce warmer-than-normal temperatures across the Northern Hemisphere this fall and winter. That outlook has not changed.

LNG Demand Stayed Firm but Domestic Futures Are Not Trading It

Estimated net flows to U.S. LNG export terminals reached 19.8 Bcf per day Friday, up 1.5% from the prior week. European storage was 67% full as of September 8 compared with the five-year seasonal average of 84%. The shortfall across Europe supports U.S. LNG demand heading into fall. European buyers are competing for available cargoes with winter approaching and storage running that far behind the seasonal pace.

What to Watch

Weekend weather models set the tone for Sunday night’s opening. Commodity Weather Group has the South and Southeast staying hot through September 20. The question is whether those forecasts extend or fade heading into the last week of September.

The bias is bearish while October stays below the 50-day moving average at $2.871. A break of $2.753 restarts the decline with swing bottoms at $2.747, $2.685, and $2.668 as the targets. Recovering the 50-day weakens the setup but sellers are likely to defend the retracement zone at $2.890 to $2.922 on any counter-trend rally.

The 40 Bcf storage build, production at 113.8 Bcf per day, rigs at 132, and the Super El Niño outlook are all on the supply side. LNG feedgas near 19.8 Bcf per day and the South and Southeast heat are what is keeping the floor in place.

More Information in our Economic Calendar.