Natural Gas News: Will a Break Above $2.187 Trigger a Major Rally Next Week?

Technical Stabilization and Weekly Reversal Bottom

Last week, U.S. natural gas futures demonstrated a cautious recovery, stabilizing after testing critical support at $1.907. The market ended the week with a notable technical development—a weekly closing price reversal bottom. This pattern suggests that buying pressure may now outweigh selling at current levels, indicating a potential shift in market sentiment. While this doesn’t immediately change the downtrend, it signals a possible start of a counter-trend rally. A break above $2.187 next week could confirm this reversal, potentially driving prices toward $2.597​.

Last week, Natural Gas Futures settled at $2.143, up $0.176 or +8.95%. This is up from the weekly low of $1.882.

Hurricane Debby’s Impact on Demand

Hurricane Debby, which made landfall in Florida as a Category 1 storm, added a complex layer to the market. The storm’s path through the Southeast brought cooling rains and reduced temperatures, thereby diminishing cooling demand—a bearish factor for natural gas prices. Although the storm disrupted some supply chains and caused power outages, the overall impact was a net negative for demand as the cooling effect outweighed any supply concerns. Additionally, the National Weather Service’s forecast of cooler temperatures across northern regions further pressured prices, as lower demand in these areas could not offset the reduced consumption in the storm-hit Southeast​​.

Supply Concerns and Storage Data

Supply-side factors played a crucial role last week, with mixed signals emerging from storage and production data. The U.S. Energy Information Administration (EIA) reported a smaller-than-expected storage build of 21 billion cubic feet (Bcf), which initially provided some bullish support. However, storage levels remain significantly above last year’s and the five-year averages, which continues to weigh heavily on market sentiment. Meanwhile, natural gas production held steady, maintaining a robust output of around 100.6 Bcf/day, despite the ongoing market pressures​​.

Market Sentiment and Price Action

Despite the bearish fundamentals, bargain buying emerged as traders capitalized on the low prices. This activity, combined with a slight rebound in demand expectations for the coming week due to forecasted warmer weather, helped lift prices off their lows. The market’s resilience at the $1.90 level and the formation of the weekly reversal bottom indicate cautious optimism. However, this sentiment is tempered by factors such as high storage levels and steady production​.

Market Forecast: Short-Term Bullish Potential

Looking ahead, the natural gas market appears poised for a potential short-term rally. Should prices confirm the reversal pattern by trading through $2.187, traders could drive a counter-trend rally toward $2.597 or higher. However, this outlook is contingent on continued support from weather-driven demand and the absence of any further bearish storage surprises. Traders should remain vigilant, as any failure to maintain gains above key support levels could quickly reverse the market’s momentum back toward a bearish trend​.