Natural gas tests key daily support as Europe prepares for stronger LNG demand
Natural gas remains under pressure, but the daily chart suggests prices are approaching an important technical support zone around $2.70. This area has repeatedly attracted buying interest over recent months, increasing the probability of at least a corrective rebound.
At the same time, the recovery has yet to produce a convincing bullish reversal, as prices continue to trade below key medium term moving averages.
From a technical perspective, the market remains vulnerable while trading beneath nearby resistance around $2.90-3.00. A sustained break below current support would expose the $2.60 area, while a successful defense of the daily base could encourage a recovery toward $2.90 and potentially $3.00-3.10.
Storage data continue to favor the bears
Fundamentally, the U.S. market remains well supplied. Recent EIA storage data continue to show injections above seasonal norms, reflecting strong domestic production and relatively soft LNG feed gas demand. Analysts expect another storage build of roughly 38 Bcf this week, which would further widen inventories above the five year average and continue to weigh on Henry Hub prices.
The latest EIA outlook also projects abundant U.S. production through 2026, with storage expected to finish the injection season above the historical average. While lower prices may eventually encourage production restraint, current fundamentals still point to a comfortably supplied domestic market.
Europe may provide medium term support
The European market could become a more constructive factor later this year. Gas storage levels remain below typical seasonal levels, meaning European buyers are likely to increase LNG purchases as winter approaches. ACER recently warned that the EU will require higher LNG imports to refill storage, while the International Energy Agency continues to highlight tighter global LNG availability following disruptions linked to the Middle East conflict.
Although diplomatic efforts have reduced immediate concerns over supply disruptions in the Strait of Hormuz, global LNG flows have not fully normalized. Any renewed geopolitical escalation or stronger European procurement activity could tighten the international market and improve the outlook for U.S. LNG exports.
Buyers need confirmation before calling a bottom
Despite the bearish fundamental backdrop, the proximity of a major daily support area argues against aggressively chasing the downside. As long as support around $2.70 holds, corrective buying remains possible, particularly if expectations for stronger European LNG demand continue to build.
Nevertheless, the broader trend has not yet turned higher. A clear break above nearby resistance, as I warned in Natural gas steadies after rebound as tighter storage build offsets demand concerns, would be needed to weaken bearish momentum, while a decisive loss of current support would increase the probability of another leg lower.
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