Natural gas futures rallied Monday on short covering and hot weather, but the move stalled. Thursday's EIA report will decide if the squeeze extends.
Alpha Score of 43 reflects weak overall profile with weak momentum, poor value, weak quality, moderate sentiment.
Natural gas futures jumped nearly 5% Monday on a hotter weather forecast and a short squeeze that was the largest in years. The rally stalled under a resistance level, and the market is now focused on Thursday's storage report to see if the heat is actually tightening supply.
The contract rose to $2.806, briefly piercing a 50% retracement level at $2.798, before pulling back. It also fell short of the swing top at $2.810. The failure to hold above these levels kept the downtrend intact on the swing chart, traders said. The move was driven by short covering, not fresh buying.
Hedge funds were carrying the largest net-short position in Henry Hub futures since 2020, with short-only bets at the highest since at least 2013, according to CFTC data. The short covering was triggered by weekend forecasts that turned sharply hotter across the central and southern US, with temperatures reaching 110 degrees in some areas.
The supply backdrop remains heavy. Production held at 113.1 Bcf per day, up 2.9% year-over-year. Storage is 195 Bcf above the five-year average. Last week's injection came in at 33 Bcf, exceeding the 30 Bcf estimate and the five-year average of 23 Bcf. The weather was already warm when that number printed.
LNG feedgas reached 18.7 Bcf per day Monday, the highest reading in more than a month and up 6.9% from the prior week. European gas prices jumped 11% on Monday to a two-week high, with Hormuz tensions keeping supplies tight. The export market is pulling demand. It is not enough to offset the production surplus.
More supply is coming. Energy Transfer expects the Hugh Brinson pipeline to reach its full 1.5 Bcf per day capacity by September 1, routing more Permian gas to Henry Hub just as summer cooling demand begins to fade.
Thursday's EIA storage report now carries the most weight. The hot weather and rising LNG feedgas need to show up in a tighter build to justify the rally. A build in line with last week's excess would mark the move as a short-covering event that sellers can fade. The contract remains below the resistance zone at $2.798-2.840, and the main trend is still down until $2.810 is taken out.
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