Natural Gas Price Forecast: Steady as Market Tests Critical $2.00 Support Level

Natural Gas Prices Steady as Market Eyes Key Support Level

Natural gas futures are trading steady on Monday, with the market poised to test critical support levels. Last week’s sharp decline has set the stage for a potential breakthrough of the $2.00 psychological barrier, with the February 2024 bottom of $1.907 emerging as the next possible target.

At 12:47 GMT, Natural Gas Futures are trading $2.065, up $0.014 or +0.68%.

Bearish Factors Dominate Market Sentiment

The recent Energy Information Administration (EIA) report revealed a larger-than-expected storage build of 22 Bcf for the week ending July 19. This surprise increase has intensified downward pressure on prices, with total storage now surpassing both last year’s levels and the five-year average.

Supply Glut Persists Despite Industry Optimism

Production estimates remain robust at around 101 Bcf/d, maintaining the supply abundance that has been weighing on price recovery. This oversupply situation continues to overshadow positive industry sentiment, including Baker Hughes’ reported strong orders for natural gas and LNG equipment.

Weather Patterns Add Uncertainty

Variable weather conditions across the country are contributing to market uncertainty. While some regions face high temperatures, others enjoy milder conditions, creating an uneven landscape for cooling demand.

Drilling Activity Shows Slight Decline

The U.S. natural gas rig count dropped by two last week, according to Enverus and Baker Hughes Co. data. However, this potential slowdown in drilling activity has been overshadowed by other bearish factors.

Market Forecast

The natural gas market faces significant downward pressure in the short term. The persistent supply glut and bearish storage data continue to dominate sentiment. Traders should closely monitor the critical $2.00 support level, as a breach could trigger further selling.

However, bullish catalysts could emerge. Weather forecasts will be crucial, as any significant increase in cooling demand could provide support. Additionally, traders should watch for unexpected production disruptions or output cuts that could shift the supply-demand balance.

A tropical depression in the Gulf of Mexico adds another layer of uncertainty, although it’s too early to determine its potential impact on production.

Barring any significant bullish developments, the market outlook remains bearish for Monday’s trade, with the possibility of testing lower support levels.

Technical Analysis

Despite the rollover to the September futures contract, the key support remains the psychological $2.00 level. If it fails then look for a possible test over the value level at $1.907.

The main trend is down. A move above $2.315 will change the main trend to up. We’re not looking for a change in trend currently, but we can’t rule out a short-covering rally into at least $2.170.

The pattern we’re watching for on Monday is a closing price reversal bottom. We’ve already experienced the prolonged downmove in terms of price and time so we’re waiting for a higher close. This won’t change the trend, but it could trigger a short-covering rally, which would alleviate some of the downside pressure.