Natural gas faces renewed breakdown risk as $3.04 support comes under pressure
Natural Gas is down approximately 3.4% on October 29, trading around $3.05/MMBtu and having almost completely erased the gains of the previous two trading sessions. On the 4H chart, prices have resumed their downward movement after a failed attempt to consolidate above resistance at $3.15–3.18.
EIA inventory report could intensify price volatility
Today, the attention of U.S. natural gas market participants is focused on the weekly EIA report for the period ending October 23. The preliminary consensus forecasts an inventory build of approximately 75–76 Bcf, following the previous increase of 77 Bcf, while the five-year seasonal average stands at around 73–77 Bcf, depending on the estimate used.
If the forecast materializes, total inventories will approach 3.720 Tcf, remaining slightly above the five-year average. The latest confirmed EIA report showed 3.644 Tcf, which was 152 Bcf below last year's level but 35 Bcf above the historical average. Thus, the U.S. market is entering the heating season without a pronounced shortage, although regional differences remain significant.
The situation in South Central is particularly notable, where inventories are 3.4% below the five-year average, while the deficit in salt storage facilities reaches almost 15%. Therefore, today's report is especially important: an inventory build larger than expected could increase pressure on prices, while a smaller injection would create conditions for a technical recovery.
Middle East supply restrictions sustain uncertainty
The situation in the Middle East remains tense despite ongoing diplomatic efforts to restore regional energy trade. According to reports from October 29, QatarEnergy has extended restrictions on contractual LNG deliveries until the end of December, increasing uncertainty for European and Asian buyers.
Nevertheless, the impact of these factors on U.S. Henry Hub remains limited: even a significant increase in global prices does not allow exporters to immediately increase shipments beyond the capacity of existing terminals. Therefore, the global geopolitical risk premium is still unable to fully offset the pressure from high production and warm weather in the U.S. domestic market.
Seasonal demand limits downside potential
The current decline in NATGAS prices poses a real threat to support around $3.04, a break below which could intensify downward pressure and lead to a fall toward $2.98–2.94. However, given the seasonal factor and the situation in the Middle East, bears, as I warned in Natural gas recovery remains fragile despite stronger LNG demand, should remain extremely cautious.
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