Natural gas extends rally toward $3.50 as supply concerns intensify

Traders Union
All News
Commodities
Supply concerns fuel Natural gas rally

EIA revises storage outlook as winter approaches

The latest EIA report showed a 64 Bcf increase in natural gas inventories for the week ending September 25, bringing total stocks to 3.415 Tcf. This is 3.9% below last year's level but 2.4% above the five-year average. Today's report for the week ending October 2 is scheduled for release at 10:30 a.m. New York time. According to SynMax estimates, inventories may have increased by approximately 80 Bcf to 3.495 Tcf, which would mark the largest weekly injection since June.⠀Meanwhile, the EIA forecast released on October 6 was notably less optimistic about inventory accumulation. The agency now expects stocks to reach around 3.850 Tcf by the end of October, or 2% above the five-year average, compared with its September forecast of 3.969 Tcf and a 5% surplus. This reduction in the expected storage cushion is supporting prices ahead of the winter heating season.⠀

Lower U.S. output and Middle East tensions boost prices

On the supply side, there have also been signs of a moderate decline in production. According to industry analysts, average daily U.S. dry natural gas output fell by approximately 0.8 Bcf/d to 110.25 Bcf/d over the latest reporting week, partly due to seasonal pipeline maintenance and production restrictions in parts of the Appalachian Basin. At the same time, steady demand from LNG export terminals continues to link the U.S. market to global prices.⠀Additional momentum came from renewed tensions in the Middle East. Attacks on tankers near Qatar and disruptions to shipping through the Strait of Hormuz have raised concerns about the security of oil and LNG supplies. Brent crude climbed above $105 per barrel today, while European natural gas prices also moved higher. The immediate impact on U.S. natural gas is limited by export capacity, but prolonged disruptions to Middle Eastern supplies could intensify competition for U.S. LNG and support prices even with relatively comfortable domestic inventories.⠀

Natural gas outlook points to key test at $3.50

Over the coming weeks, the main factors for Natural Gas will be the pace of storage injections, temperature forecasts for the second half of October, and LNG export terminal utilization. According to the EIA's October forecast, substantial inventories and further production growth should limit excessive price increases, while the average Henry Hub price in 2027 is expected to be around $3.16/MMBtu.⠀Nevertheless, the current technical picture remains favorable for buyers. The nearest support is located around $3.40–3.38, followed by $3.34–3.30. Buying interest on every pullback and the breakout above resistance around $3.40 indicate that the price still has room to advance toward $3.50. A break below $3.40, as noted in Natural Gas tests $3.40 as tighter balance supports bullish momentum, would likely lead to a decline toward $3.30, where buyers may return.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.