Natural Gas News: Bears Eye 200-Day Support as Inventory Builds Pressure Futures

Natural Gas Dips as Traders Test Key Support Level and Fundamentals Stay Bearish

U.S. natural gas futures are drifting lower in post-holiday trading, with prices inching toward critical technical support at the 200-day moving average of $3.181. This level has become the focal point for traders, acting as a pivot in a market increasingly defined by a lack of bullish drivers and persistent oversupply signals. With no clear weather-driven demand yet and production running hot, market sentiment remains soft.

At 12:24 GMT, Natural Gas Futures are trading $3.330, down $0.004 or -0.12%.

Is Oversupply from Storage and Output Keeping Bulls on the Sidelines?

Last week’s storage injection came in at 120 Bcf, significantly higher than the five-year average of 87 Bcf. This marks the second week in a row of triple-digit builds and pushes inventories to 2,375 Bcf—now 3.9% above the five-year average. The year-on-year storage deficit narrowed to 12.7%, underlining how persistent supply growth is outpacing consumption.

Production remains elevated, with Lower 48 dry gas output averaging 107 Bcf/day—nearly 5% higher year-on-year. While gas-directed rig counts have fallen slightly, infrastructure constraints in high-output regions like the Permian are causing regional pricing dislocations, including negative spot prices. These conditions suggest little near-term relief from the supply side.

Can Power Burn or LNG Support Stall Further Losses?

Electricity demand showed modest gains, rising 2.5% year-over-year for the week ending May 17, per Edison Electric Institute data. NOAA’s early June outlook hints at warmer conditions, which could spark higher cooling demand and provide some short-term support. However, much of the East and Midwest remains under temperate weather, limiting widespread power burn.

Solar generation continues to displace gas in key regions, especially the western U.S., and that trend further pressures demand for gas-fired generation. LNG exports and pipeline flows to Mexico are holding steady, but their growth remains too slow to offset the oversupply picture.

Will Technical Support at $3.181 Give Way?

With traders defending the $3.181 level, price action has narrowed between the 200-day and 50-day moving averages. A decisive break below $3.181, followed by weakness through $3.098 and $3.035, could accelerate a leg lower, targeting the next major support at $2.376. Conversely, a push through resistance at $3.438 and $3.513 would signal the exit of weak shorts and may trigger momentum buying.

Market Forecast: Bearish Bias Holds Until Weather or Supply Shift Emerges

The outlook remains bearish in the near term. With strong production, bearish storage data, and limited demand growth, downside risk dominates. Unless early June weather patterns intensify cooling needs or supply unexpectedly contracts, a break below the $3.181 threshold could open the door for a deeper retracement. Traders should remain cautious and monitor technical levels closely.

More Information in our Economic Calendar.