Natural gas futures are trading well below the 50- and 200-day moving averages, which is encouraging short sellers. The current environment is particularly tough for long positions as bears target the recent low of $1.882 and may push even lower if selling pressure continues. Some market participants are targeting as low as $1.60 or $1.48 if current conditions persist. Despite the bearish sentiment, producers may soon consider cutting production to balance the market, as they did earlier this year, especially if prices continue to fall.
Last week’s performance
Last week was marked by volatility, with natural gas futures ending the week down 4.76%. The market struggled with changing weather conditions that reduced demand expectations and faced strong technical resistance. After starting the week with hopes of higher demand due to hot weather in key U.S. regions, forecasts turned toward milder conditions, particularly in the Northeast and Midwest, dampening market sentiment. At the end of the week, natural gas prices settled at $2.022, falling below critical support levels and raising fears of further declines.
Concerns about storage and supply
A key driver of last week’s bearish trend was higher-than-expected natural gas storage additions. The Energy Information Administration (EIA) reported 35 billion cubic feet (Bcf) of injection for the week ended August 16, beating expectations and heightening oversupply fears as the market approaches the off-season. Despite production cuts from major players such as EQT and Coterra Energy, oversupply concerns remain, especially with lower 48 state production still hovering around 101 Bcf/d. The recovery in LNG exports following disruptions from Hurricane Beryl adds further complexity to the supply-demand balance.
Market outlook
The outlook for natural gas remains bearish in the near term. With summer demand waning and inventories high, prices are likely to decline. Potential late-summer heat waves could provide temporary support, but a significant price recovery is unlikely before the winter heating season. Traders should monitor upcoming EIA inventory reports, weather forecasts, and global demand trends for signs of a change in market trends. Currently, the market remains vulnerable to further declines, with $1.882 serving as a key support level that could trigger further selling if broken below.
