Market activity and technical levels
Natural gas production on Tuesday was at 100.6 billion cubic feet per day (Bcf/d), a level that usually pushes the price lower. The market is now eyeing the previous support level at $2.149; a break below this level could result in a further decline to $2.069. This came after Monday’s breakout rally and Tuesday’s reversal, suggesting a volatile trading environment.
Bullish sentiment and market support
The ongoing rally has been supported by increasingly bullish sentiment among asset managers, with net long positions hitting a six-week high in early August. This increase has largely been driven by the unwinding of short positions and expectations of rising refrigeration demand in the mainland 48 states, which have attracted new buyers. In addition, the market is supported by the possibility of a rare drawdown of summer supplies, highlighting the impact of reduced production and stable demand.
Weather forecast and market influence
Weather forecasts remain a key factor in current market dynamics. NatGasWeather is forecasting moderate national demand for the next three days, with temperatures ranging between 15 and 25 degrees in the northern U.S. However, demand is expected to increase over the following 4 to 15 days as much of the interior U.S., particularly the deserts of the Southwest and Texas, see highs of between 25 and 38 degrees Celsius. This expected increase in demand contributes to an optimistic forecast for natural gas prices.
Market forecast
Given the tightening supply-demand balance and the forecast increase in cooling demand, the near-term outlook for U.S. natural gas futures remains optimistic. Traders should keep an eye on weather-related demand and potential global supply disruptions, particularly from Russia, as these factors could further influence price movements.
