Natural Gas Futures Slide as Storage Surplus, Cooler Forecast Weigh

The Commodity Weather Group still expects above-average temperatures in the interior West through August 7. The outlook turned cooler than previously expected. That was enough to pressure August and September when the market is already sitting on a surplus, traders said. Texas and the West can support power demand on their own. This market needs broad persistent heat across the Midwest and Northeast to change the national balance, and the forecast is not delivering that.

Lower-48 gas demand was estimated at 77.6 Bcf per day Friday, down 6.5% from a year ago. Production hit 111.6 Bcf per day, up 2.9% from a year earlier. That gap is why the front end cannot hold a rally, several traders said.

August natural gas is trading in a retracement zone between $2.946 and $2.839, formed by the April 24 main bottom and the June 1 main top. Trader reaction to this zone is likely to determine near-term direction. A sustained move above $2.946 would indicate buying interest. A break below $2.839 would signal selling pressure, technical analysts said.

February natural gas opened and settled near $3.904 after an intraday surge to $3.983 failed to hold. The long upper shadow shows sellers stepped in after the market crossed the 50-day moving average at $3.962. The new short-term retracement zone is $3.723 to $3.983. Its retracement zone at $3.853 to $3.822 is the nearest downside target, traders said.

The next weather updates decide whether nearby gas stabilizes or breaks the bottom of the range. Bulls need the heat to strengthen and spread east. Sellers need the cooler breaks to keep returning across the highest-population demand regions. The storage surplus gives sellers the edge on every rally attempt, and production above 111 Bcf per day is not helping the bulls.