Natural Gas Price May Fall Below $2.848: Key Levels at Risk

Natural Gas Price May Fall Below $2.848: Key Levels at Risk

Quick Look:

  • Natural gas price is $2.848, slightly above the 20-day MA, with potential declines expected.
  • Key levels include the 61.8% retracement at $2.74, pennant triangle centre at $2.70, and 200-day MA at $2.47.
  • High temperatures and a potential tropical storm in the Gulf of Mexico influence market sentiment.
  • Bearish outlook due to strong production, mixed weather demand, and traders selling into rallies.

Natural gas prices are poised for a potential decline, with the current price hovering at $2.848. Several critical support and resistance levels are in focus, influencing market sentiment and future price movements. The natural gas price is slightly above the 20-day moving average (MA). However, the 61.8% retracement level at $2.74 failed to prevent the recent downturn. Additionally, the centre of the pennant triangle at $2.70 is seen as a potential support level, but breaching this could lead to further bearish sentiment. The 200-day MA at $2.47 represents a more substantial support threshold, while the pivot point is at $2.652, and the 50-day MA stands at $2.595.

Natural Gas Faces Resistance at $2.92, $2.95, and $2.931

On the resistance front, the interim swing high of $2.92 was surpassed, yet the price did not sustain above it. A daily high rally to $2.95 is necessary for a bullish breakout, with a decisive close above this level. The 200-day MA for a bullish breakout is also set at $2.931. Last Thursday, natural gas stalled and reversed, prompting a bearish continuation. A recent rally completed over 99% from the April 25 swing low but failed to sustain its momentum. Yesterday’s bullish reversal off the 20-day line initially showed promise but ultimately reversed. This week saw a bearish shooting star candle on the weekly chart, signalling a potential downside.

Heatwaves and Storms Influence the NatGas Market

High temperatures forecasted for the southern and eastern U.S. from June 18-24 and a tropical storm in the Gulf of Mexico are also significant factors. The primary focus in trading currently revolves around a U.S. heatwave and a potential tropical storm in the Gulf of Mexico. Excessive heat has been factored into recent price movements, with attention now on 10-15 day forecasts. Tropical storms can lead to demand drops and LNG disruptions, affecting market sentiment. Increased production and flow capacity contribute to a bearish outlook.

Bearish Sentiment Dominates Natural Gas Market

The overall market sentiment is bearish. Traders are reacting to weather forecasts, increased production, and uncertainties related to the tropical storm. In the short term, the outlook remains bearish, with strong production and mixed weather demand influencing professionals to sell into rallies. However, cautious sentiment persists due to the moderating effects and potential disruptions from the tropical storm, which may offer temporary support. Experts remain focused on high temperatures as a standard factor, maintaining caution unless a prolonged heat dome occurs. Trading strategies involve monitoring the storm’s progression and its impact on supply and demand.

Natural Gas to Supply 42% of U.S. Electricity in 2024

Natural gas-fired electricity generation has increased year-to-date, with the U.S. Energy Information Administration (EIA) projecting natural gas to supply around 42% of U.S. electricity in 2024. This represents a 3% growth in 2024 and a 2% increase in 2025. From January 1 to June 17, generation exceeded 30 million megawatt-hours (MWh), the highest since at least 2021. The market has already factored in the current heatwave, contributing to recent price rallies. Future focus will be on the 10-15 day weather forecasts for early July trends, guiding market movements. Tropical storms typically have a bearish effect, leading to demand destruction and LNG plant disruptions. These factors are crucial in shaping short-term market forecasts.

Natural Gas Market Remains Bearish in Short Term

The market outlook remains bearish in the short term due to strong production and mixed weather demand. Traders will continue monitoring storm progression and its impact on supply and demand to make informed decisions. By closely observing these support and resistance levels and key market events, traders can navigate the volatile natural gas market more effectively.