Natural Gas News: Futures Pop on Short Squeeze, but Face Moving Average Resistance

Natural Gas Futures Snap Five-Day Slide with Sharp Technical Rebound

U.S. natural gas futures staged a sharp reversal Friday, climbing 6.04% to $3.739 after five consecutive days of selling pushed the market into extreme oversold conditions. The bounce caught short-sellers off guard, triggered by the August contract rolling into prompt month status and underscored by heat-driven demand that refused to fade despite bearish storage data.

Did EIA Storage Data and OPEC Calm Weigh on Natural Gas?

The week’s heavy selloff was driven by Thursday’s EIA report showing a 96 Bcf injection, well above the 88 Bcf consensus, reinforcing an oversupplied backdrop despite extreme heat. Storage levels sit 179 Bcf above the five-year average, with injection rates running 28% over seasonal norms.

Geopolitical risk premiums faded after the Israel-Iran ceasefire on June 23, removing war pricing across energy markets. This development stripped away support that had partially buffered natural gas prices, making the commodity more vulnerable to the oversupply narrative, especially as traders anticipated robust injections during the peak summer cooling season.

Can Record Heat Demand Override Bearish Storage?

Despite bearish headlines, a record-breaking heat wave across the eastern U.S. quietly underpinned natural gas demand. Boston hit 102°F on June 24, while heat indices spiked to 108°F across 25 states. Power generation demand surged, with gas-fired generation accounting for 44% of PJM’s output and ISO-New England demand hitting 25,898 MW, the highest since 2013.

Algonquin Citygate prices reflected the volatile response to weather-driven demand, spiking to $6.75/MMBtu midweek before falling sharply to $2.61/MMBtu. While futures ignored these spot spikes during the week’s decline, the weather-driven demand shock set the stage for Friday’s reversal.

How Did Technical Factors Trigger the Short Squeeze?

Technical breakdowns below the 50-day ($3.9) and 200-day ($3.781) moving averages triggered algorithmic and momentum-based selling, with futures dropping to $3.403 before Friday’s bounce. The August contract’s prompt month rollover forced traders to adjust positions, creating fresh technical positioning opportunities that aligned with extreme oversold signals.

Friday’s move was amplified by a cascade of short-covering, with managed money positions caught in a squeeze as price action reversed sharply. End-of-month rebalancing and pre-weekend position-squaring further fueled the volume surge, transforming the bounce into a powerful 6% move.

Market Forecast: Can Bulls Hold Gains into Next Week?

Friday’s rally was rooted in technical and positioning factors rather than a fundamental bullish shift. However, residual demand strength from record heat, above-normal temperatures forecast into early July, and strong LNG exports averaging 14.9 Bcf/d provide bullish undercurrents.

While storage remains heavy and will likely cap upside, the sensitivity of natural gas markets to heat-driven demand shocks remains clear. Traders should expect continued weather-driven volatility with a slightly bullish tilt near-term, especially if additional heat persists and oversold conditions remain in play early next week.

More Information in our Economic Calendar.