The EIA projects storage at 3,985 Bcf by October, a 10-year high. September futures test $2.798 as heat fails to overcome surplus. Key levels: $2.810 and $2.992.
Alpha Score of 44 reflects weak overall profile with moderate momentum, poor value, weak quality, weak sentiment.
September natural gas futures are trying to rally Wednesday. The attempt is running into a storage surplus that hot weather alone cannot erase. The Energy Information Administration projected U.S. storage would reach 3,985 Bcf by the end of October. That is the highest level in 10 years and 5% above the five-year average.
That number landed Tuesday and immediately shifted the conversation from this week's heat to how much gas the country is carrying into winter. The contract is testing the lower boundary of a key retracement zone. It needs to clear the pattern of lower highs before the bounce means anything beyond short-covering.
At 10:58 GMT, September natural gas futures were trading at $2.787, up 0.72%. On Tuesday, the contract settled at $2.767, down 0.97%.
The market is testing the lower 50% level of a retracement zone at $2.798. Overtaking that level would indicate buying is getting stronger. Traders need to take out $2.810 to change the main trend to up. Above that, the upper Fibonacci level at $2.840 serves as immediate resistance. If buyers clear it, the path opens to the next swing top at $2.979. The 50-day moving average sits at $2.992, with an intermediate retracement zone at $2.996 to $3.085. On the downside, short-term support sits at $2.713.
Natural gas moved higher early Tuesday on a hotter forecast before giving it all back by the close. Above-normal temperatures across the South from August 16 through August 20, with highs running from the upper 80s to low 110s, are pushing air-conditioning load and gas burn at power plants higher. The southern two-thirds of the country stays hot through the weekend in the 90s and 100s. The northern United States cools into the 70s and 80s.
That is strong short-term demand. It is not overcoming the storage surplus. Last week's injection came in at 33 Bcf against a 30 Bcf estimate and a five-year average build of 23 Bcf. The weather was already warm when that number printed, and storage still built faster than expected. Electricity output rose 0.9% year-over-year in the week ending August 1. The 52-week total is up 2.1%. The power market is consuming more, just not enough to change the injection pace with production running where it is.
Lower-48 dry gas output hit 112.0 Bcf per day Tuesday, up 2.3% year-over-year. The EIA does not see it slowing down. The agency expects 111.2 Bcf per day this year and 116.0 Bcf per day in 2027. Demand is forecast at 92.0 Bcf per day, actually trimmed from last month's estimate. The production number stayed the same. The gap between supply and consumption is widening. The rig count dropped three to 124 last week. It made no difference. Production did not flinch.
LNG feedgas slipped to 17.6 Bcf per day Tuesday while export facilities work through maintenance. European storage sits at 59% against a five-year average of 76%. That should be pulling harder on U.S. cargoes. The export demand is not strong enough right now to keep pace with what production is putting into the system.
The timing gets worse for buyers on September 1. Energy Transfer expects the Hugh Brinson pipeline to hit its full 1.5 Bcf-per-day capacity. That sends more Permian gas straight to Henry Hub just as summer cooling demand starts to fade and before winter heating picks up. More supply arriving during the shoulder season is not what this market needs with storage already heading toward a 10-year high.
The EIA's October storage forecast changed the trade this week. The market was bouncing on heat and short-covering. Now it has a projection showing nearly 4 Tcf in storage before winter with production at 112 Bcf per day. LNG feedgas is running below where it needs to be. Hugh Brinson adds 1.5 Bcf per day of Permian supply in September right when cooling demand fades. The rally needs smaller builds and stronger exports to hold. None of those showed up this week.
The main trend is still down. The pattern of lower highs has not been broken. The contract is testing the lower boundary of the retracement zone. The swing top at $2.810 changes the trend. The 50-day moving average at $2.992 sits right above it. Buyers have to clear both before this rally is anything more than another short-covering bounce that sellers fade heading into fall.
For a deeper look at positioning, see Natural Gas: 207K Shorts Face Heat Test as Front-Month Holds Support.
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