Natural gas remains under pressure as supply concerns limit recovery potential

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Natural gas faces critical support test

U.S. inventories remain adequate ahead of the heating season

⠀The latest EIA report showed an 85 Bcf increase in U.S. natural gas inventories for the week ending October 2, bringing total stocks to 3.500 Tcf, compared with expectations of approximately 79 Bcf. The current volume is 130 Bcf, or 3.6%, below last year's level but exceeds the five-year average by 68 Bcf, or 2%. Meanwhile, in its forecast released on October 6, the EIA significantly revised its expected end-of-month inventory level to 3.850 Tcf, approximately 2% above the seasonal average.⠀The agency also forecasts an average annual Henry Hub price of $3.48/MMBtu in 2026 and $3.16 in 2027. Thus, the market has sufficient reserves ahead of the heating season, while a sustained increase in prices will require either stronger consumption or reduced supply.⠀

Supply disruptions and Middle East risks affect LNG markets

⠀Last week, Tropical Storm Isaias caused a temporary reduction in production in the Gulf of Mexico, while maintenance at Freeport LNG and Cove Point facilities limited export terminal utilization. At the same time, geopolitical uncertainty persists in the Middle East, particularly around the Strait of Hormuz and the security of Qatari LNG supplies.⠀Potential disruptions to exports from the Persian Gulf could support European and Asian gas prices, increasing the competitiveness of U.S. LNG and demand for natural gas from American export facilities. However, the impact of this factor on Henry Hub remains indirect and depends on the availability of U.S. liquefaction capacity. According to the EIA's October forecast, U.S. LNG exports will increase from 15.1 Bcf/d in 2025 to 17.6 Bcf/d in 2026 and 18.6 Bcf/d in 2027.⠀

Technical outlook points to a critical support test

⠀In the coming days, the direction of Natural Gas prices will depend on changes in temperature forecasts for the central and eastern United States, the recovery of production after the storm, and expectations ahead of the next EIA report on October 15. Colder weather could accelerate the emergence of heating demand and support another test of $3.40–3.46, while continued mild temperatures and a recovery in high production levels would increase the likelihood of a correction.⠀The bulls' failure to break above resistance around $3.42 and the loss of support at $3.37 have led to a decline toward the $3.33 support level, where the price is currently trading. A return to this support, as noted in Natural gas faces renewed selling pressure as U.S. inventories rise, increases the risk of a breakdown and a further decline toward $3.30–3.27, although buyers may become more active during this decline.

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